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German government disagrees over tax stimulus

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German government disagrees over tax stimulus

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There is disagreement in German Chancellor Angela Merkel’s governing coalition over new measures to shield the economy from what is shaping up to be the worst recession since the Second World War.

Politicians will meet later today to agree the outlines of a second stimulus package – but they are already deeply divided over whether to lower taxes to stimulate growth. The conservative Christian Social Union has vowed to reject any package that does not include tax cuts. But the centre-left Social Democrats want the social contributions paid by Germany’s workers for pensions, health and unemployment insurance to be reduced instead. The Chancellor has acknowledged the need for further stimulus measures, but now faces the daunting challenge of uniting her left-right administration around a common approach. She has previously ruled out tax cuts. Her government was one of the first to bring in measures to protect against the downturn – but the 31 billion euro package agreed in November has been criticised as too modest.