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German coalition agrees economic reforms


German coalition agrees economic reforms


Germany’s “grand coalition” government has finally reached agreement on controversial economic issues after weeks of arguing about the so-called “wealth tax” and parent subsidies.

Chancellor Angela Merkel’s Christian Democrats and the centre-left Social Democrats have agreed that parents who stop work to look after newborn babies will get two-thirds of their salaries for up to 12 months and fathers will be able to take an additional two months off, on top of that one year.

The deal over the “rich tax” is that people earning more than 250,000 million euros a year will, from next year, pay 45% income tax, that is an increase from the present 42%.

Business income is excluded from the higher tax. Hubertus Heil, general secretary of the Social Democratic party, explained: “We don’t want small and medium sized businesses to suffer. That’s why we reached an agreement – under the terms of the coalition contract – that we wouldn’t do anything that adversely affected business.”

The subsidies for parents are a measure aimed at encouraging Germans to have more children in order to reverse the country’s falling birth rate.

Politicians are concerned at the threat that is posed to funding of Germany’s social security system in the future.

Opposition parties criticised the deal. The Greens said the child support agreement contained “all manner of tricks” and was not being properly financed.

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