German Finance Minister Peer Steinbrueck this weekend ruled out tax hikes over the next two years, as they could damage demand, but also slammed plans by the conservatives to cut taxes after September's federal election.
Tax policy is shaping up to be a major issue in September's election, with the incumbent government planning record net new borrowing next year to support public finances that have been hit by Germany's deepest post-war recession.
"Tax hikes decrease purchasing power and would exacerbate the downwards spiral of the crisis," Steinbrueck told Sunday's Bild am Sonntag newspaper. "During this economic crisis, I believe tax hikes are as damaging as tax cuts," said Steinbrueck, a leader of the Social Democrats, who rule in an uneasy coalition with Chancellor Angela Merkel's conservatives.
Steinbrueck also criticised calls from Merkel's Christian Democrats (CUD) and its favoured coalition partners after the September 27 election, the pro-business Free Democrats (FDP), to cut taxes even as the federal budget deficit soars to record highs. "The CDU has erred on the side of ridiculousness with its various tax suggestions. And the FDP are completely off their trolley concerning this topic," he said. The CDU and its Bavarian sister party the Christian Social Union (CSU) have made tax cuts a central part of their election campaign, and envisage reducing Germans' tax burden to the tune of 15 billion euros.
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