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Berlin squashes hopes of stimulus frenzy

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Berlin squashes hopes of stimulus frenzy
Photo: DPA
17:35 CET+01:00
The German government has warned business leaders that it cannot fulfill all the demands made ahead of negotiations for a second financial stimulus package.

Government spokesman Thomas Steg said on Friday that it was hardly surprising that demands were being made on all sides with only days to go before the summit between the parties in Chancellor Angela Merkel's governing coalition. But Steg declared, “the wish-list deadline passed over a week ago.”

Christian Democratic Union (CDU) leader Angela Merkel will meet Horst Seehofer, chairman of the CDU's Bavarian sister party the Christian Social Union (CSU), on Sunday to discuss the differences between the parties on the stimulus package. The issue of speedy tax reductions has been a source of friction within the centre-right Union in the past weeks, but CDU General Secretary Ronald Pofalla declared recently that he was confident that differences would be ironed out at this meeting.

The heads of the CDU and the CSU will then meet the leaders of the Social Democratic Party (SPD) on Monday to begin talks on how to stimulate the German economy in the face of a worsening recession.

The SPD favours lowering health insurance contributions rather than lowering taxes, while the four most important German trade associations are demanding a full range of reductions in taxes, social security and health insurance contributions, as well extra investments in infrastructure. The government is currently analysing what would be affordable and what would stimulate the economy.

Peter Ramsauer, the CSU's pointman in parliament, told the business daily Handelsblatt that “a stimulus package without tax reductions would be simply wrong,” and that he wants rapid tax reductions to be agreed on by Monday. Meanwhile, SPD General Secretary Hubertus Heil told broadcaster ZDF that “investments must come first.”

Heil also renewed the SPD's attack on Merkel's handling of the financial crisis: “She clearly doesn't have any ideas of her own on how to handle the economic crisis,” he told the Neue Presse newspaper. “Mrs. Merkel often orientates her political behaviour according to its public effect. It occasionally looks opportunistic.”

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