Germany faces up to fiscal disaster
October 31, 2005
By Deborah Cole
Berlin - Germany's incoming left-right coalition government was set Monday to unveil plans for the biggest budget savings package in the country's history.
Meanwhile Social Democrat party boss Franz Muentefering faced a brazen challenge to his leadership.
Chancellor-designate Angela Merkel's Christian Democrats and Muentefering's Social Democrats are in the final throes of negotiations on forming a so-called grand coalition and were due to hold talks later Monday on Germany's dire fiscal straits.
Both parties acknowledge they will have to cut a hair-raising, record-setting 35 billion euros (42 billion dollars) from the public budget by 2007 -- amounting to 425 euros in belt-tightening per German, or 1,350 euros for everyone with a job and paying social security.
The meeting is expected to produce a financial roadmap for the new government, set to take power in late November, including broad outlines for spending cuts and possible tax increases to bring the budget under control.
Germany has breached the EU's budget rules limiting public deficits to three percent of gross domestic product, drawn up at its own behest, every year since 2002.
The incoming government aims to respect the rule again by 2007, but will demand sacrifice of Germans at a time when economic growth is at a near standstill thanks in large part to anemic consumer spending.
"One doesn't envy (Peer) Steinbrueck," the business daily Handelsblatt wrote in an editorial, referring to the incoming Social Democrat finance minister.
"His task is nothing less than to square the circle -- to save and generate growth at the same time...There is nothing for the new government to do but to strike a skillful balance between saving and spending, between cutting subsidies and boosting growth."
Press reports said the programme would likely include a moderate increase of the value-added tax, currently at 16 percent, and subsidy cuts.
The measures will inevitably be unpopular, and come at a time when Muentefering, who is to serve as vice-chancellor under Merkel, is confronting a bold grab for power within his own party.
Muentefering had nominated a loyal deputy, Kajo Wasserhoevel, to serve as the Social Democrats' general secretary, who is responsible for managing party business and ensuring discipline among its often willful rank-and-file.
However the party leader's "unilateral" move sparked indignation among some factions, leading the unofficial chief of the party's left-wing, Andrea Nahles, to declare her own candidacy.
The Social Democrats were hoping to snuff out the dispute ahead of Monday evening's coalition talks, and before a party congress slated for November 14-16 when the general secretary is to be formally elected.
Although Nahles has won some top-level support for her bid, leading party officials said a victory for her would hobble Muentefering at a crucial time and expose deep fissures in the party.
"I think this approach is pretty scandalous," the spokesman for the Social Democrats' right wing, Johannes Kahrs, said of Nahles.
"The party cannot afford, in the middle of coalition negotiations, to have our leader weakened," he added, warning that Muentefering could be forced to step down if Nahles triumphed.
Merkel is expected to be voted in as Germany's first woman leader by the lower house of parliamenton November 22, two months after her Christian Democrats narrowly beat current chancellor Gerhard Schroeder's Social Democrats in a general election.
Schroeder has said he will not serve in the grand coalition government, last seen in Germany in the late 1960s. - AFP
http://www.busrep.co.za/index.php?fArticleId=2974291&fSectionId=552&fSetId=662
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America's debt problem is a "sign of leadership failure"
We have "reckless fiscal policies"
America has a debt problem and a failure of leadership.
Americans deserve better
Barack Obama
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