Leading German Social Democrat (SPD) and foreign minister Frank-Walter Steinmeier said in a magazine interview he opposed income tax cuts to stimulate the economy in response to the global financial crisis. Germany's ruling "grand coalition" of conservatives and the SPD has said it will propose steps to boost sectors of the economy over the coming weeks, but there is disagreement over what measures to implement.
Steinmeier, who will challenge conservative Chancellor Angela Merkel in next year's federal election, backed his party colleague, Finance Minister Peer Steinbrueck, in opposing direct tax cuts. "Experience has taught us: income tax reductions are not the recipe to fight a paralysed economy because people tend to save their money in uncertain times instead of spending it," Steinmeier told Stern magazine in an interview.
Some conservatives, including Economy Minister Michael Glos are pushing for tax cuts. But the SPD and Merkel remain focused on balancing the federal budget by 2011, making tax cuts unlikely.
The government has said it will try to shield the economy by focusing its measures on specific sectors, such as the auto and construction industries. Steinmeier, who on Saturday sought to link Merkel's conservatives to the financial turmoil that has forced Berlin to launch a 500 billion rescue plan for banks, said his main aim was to protect jobs. "Using the same zeal we had for the bank rescue package, we must set up a protective shield for jobs," said Steinmeier.