Chancellor Angela Merkel called on Saturday for tax cuts in Germany, despite growing strain on government finances. Tax cuts, investment and a solid budget policy should be at the core of economic policy, she said. "That is the triad with which we will achieve growth and get out of the crisis," Merkel told fellow Christian Democrats (CDU) at a party event in the western town of Aachen.
She gave no timeframe for cutting taxes. Merkel has made tax cuts a central part of her campaign for a federal election in September, although she has played down the prospect of tax relief before 2012 under pressure from members of her own party. Germany is facing its deepest recession since World War Two this year.
On Thursday, Germany slashed its tax revenue estimates for 2009 and future years. The combination of declining revenues and higher spending on jobless benefits and stimulus measures is expected to rip a huge hole in the German budget, pushing the deficit above EU limits to about 3.9 percent of gross domestic product (GDP) this year. Finance Minister Peer Steinbrueck, whose Social Democrats share power with Merkel's CDU, said on Thursday pledges to cut taxes were "illusionary".
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