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Axe falls on welfare and family benefits

DDP/The Local · 7 Jun 2010, 16:58

Published: 07 Jun 2010 16:58 GMT+02:00

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Outlining the government’s long-awaited plan to get finances back in shape in the wake of the global financial crisis, Merkel spoke of an “unparalleled show of strength” to put the nation’s financial future back on a “firm footing.”

After an intensive, two-day cabinet session, the coalition government of Merkel’s Christian Democrats (CDU) and the pro-business Free Democrats (FDP) has decided to slash €80 billion from the budget by 2014, including €11.2 billion next year, much of it from social benefits.

Alongside Vice Chancellor and FDP leader Guido Westerwelle, Merkel said both business and broader society would have to do their part in getting the budget back in balance.

Merkel said the goal of cuts to social spending would be to enhance the appeal of work over welfare. There would be cuts to Hartz IV unemployment benefits and to parental benefits known as Elterngeld – the latter of which Merkel described as “painful.”

New parents on a monthly net income of more than €1,240 will receive Elterngeld equalling 65 percent of their income, rather than the current 67 percent. The maximum rate will however remain at €1,800 per month.

Re-integration help for the unemployed, moreover, will be returned to 2006 levels.

Merkel stressed that a €12 billion increase in spending on research, education and development between now and 2013 would go ahead as planned.

Although there will be no increases in the rates of income or sales tax, present tax exemptions on energy will be abolished and an “ecological air transport tax” will be introduced. The energy industry will also be taxed on their profits arising from the extension to the lifespan of nuclear power plants.

The banking sector, meanwhile, will be slapped with a financial markets transaction tax, which the government plans to champion in Europe and beyond.

Cuts to the public sector, including 10,000 civil service jobs by 2014, would also deliver significant savings, Merkel said, stressing that a reduction to the armed services would be “not marginal” but rather “fundamental.”

Details were yet to be decided, she said. However a Bundeswehr reform commission would examine the impact of cutting 40,000 staff from the military's current level of 250,000, and report by the beginning of September.

Berlin’s plan to rebuild the historic city palace or Stadtschloss will be the most immediate victim of the cuts, with the government announcing it will contribute no funds between 2011 and 2013.

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Merkel said the goal was to stick to the debt limits set by the German constitution and the European Stability and Growth Pact, which order countries to keep their annual deficits below three percent of GDP and their national debt below 60 percent.

The actual 2011 budget will be announced in detail on July 7.

Vice Chancellor Westerwelle said: “We have in the last few years lived beyond our means. Nobody likes to save and yet it is practically necessary.”

He said it was a just savings packet in which business and society contributed an equal share.

DDP/The Local (news@thelocal.de)

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Your comments about this article

20:01 June 7, 2010 by Brugge
22:05 June 7, 2010 by Bushdiver
I know quite a few people on Hartz IV that have been on that for years and have no interest whatsoever in looking for work. The cuts in civil service jobs isn't a bad idea. Most of them aren't worth a crap anyway but that's just the tip of the iceberg. There are all kinds of Government jobs that could be done away with. Why not introduce a PKW Maut for foreign vehicles using the Autobahn. Everone else does it.
23:04 June 7, 2010 by Talonx
@ bushdiver

Either you and your folk have lots of awful friends, you're oversimplifying, or you're a liar. Which is it?

Anyways, the cuts are almost non-existent, this is a token gesture to the FDP, one that will further decrease the current government's popularity. It's still idiotic, they should've increased taxes on the rich by the same 2% instead, would accomplish a hell of alot more.

Everything else looks in order in responsible. Particularly, 'fundamental' reductions in the size of the military, think of what could be saved in the world if all nations were to cut military budgets; stabilized markets, the end of funding to worthless weapon technologies, and so on.
23:04 June 7, 2010 by JohnnesKönig
and of course the politicians deserve every Euro the get!
23:48 June 7, 2010 by Talonx
I side with Milton Friedman and Adam Smith on this issue.

Friedman had the negative income tax that would reflect in benefits and brackets, below the poverty line as equivalent benefits instead of taxes.

And Smith felt that any person of sufficient means should not feel adverse to giving back to society an unequal share if they could afford it.
00:21 June 8, 2010 by whatzup
Unemployment is built in to the economic model in germany so now the government can have it both ways - hold to the design which stipulates unemployment and reduce the support for the unemployed. In other words sock it to those most vulnerable and least able to afford it. Of course politicians will all continue to eat well despite the "unparalleled show of strength".
08:30 June 8, 2010 by hOU
And while this is happening Ferkel sticks her engorged, bloated snout ever deeper into the cash pile and takes the €4K per annum pay rise... Revolting lackey! Have you not fed enough?!
08:42 June 8, 2010 by honu
"I know quite a few people on Hartz IV that have been on that for years and have no interest whatsoever in looking for work".

Hey! and how would you know these people? Do you frequently have dinner for these people, or go to the opera with them? Or does " quite a few people" equal someone your friend told you about?

You sound like you're from the US, dude. Am i right?
14:04 June 8, 2010 by vitor
I think the mentioned cuts are appropriate, but the politicians should also give an example and get some pay cuts for themselves or at least hold back on getting raises. They are employees of the people and if they say Germany needs budget cuts, they should also be involved. This should be demanded from the german people, as I think many agree that the government is already too big and expensive for the country.
15:40 June 8, 2010 by Talonx
I would like to see those claiming that Hartz IV is appealing to a 'significant' (statistically) proportion of the population provide some evidence or shut the h#ll up and stop contributing idiocy.

Oh, that's right it's all speculation supported by nothing except what you would like to be true so you don't need to feel responsible about your privilge costing someone else their livlihood.
18:00 June 8, 2010 by Talonx
Bailing out banks isn't the problem, the problem is that due to deregulation we've had to do it more than once in less than 100 years. Randian markets are a fiction.

As far as the cuts to welfare, they are a token meant to appease the FDP and shut them up. The FDP won't be around for much longer(nor will the CDU/CSU if they keep it up), and the current coalition is already marginalized due to what took place in NRW (due to Angie waiting out the elections before passing regulations and bailing out Greece and underestimating everyones intellligence). So long as these current cuts remain a simple token and not a trend I think things will be just fine. Looking forward to Red, Green, and Black (wishful thinking, I know).
14:48 June 10, 2010 by Talonx
@ Erised

And I know this one guy who doesn't understand statistics and thinks all the world conforms to his personal experience of it . . .

You have to be taking some crack to think that HartzIV is 'appealing' that or you would have to never have understood what privileg is.
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