Germany's fiscal policy is unsustainable for future generations and risks setting a bad example for other European nations, the eurozone's top finance official was quoted as saying on Tuesday. Jean-Claude Juncker, prime minister of Luxembourg and chairman of the 16-nation euro area, told Handelsblatt business daily that Germany's debt mountain was "excessive and scarcely bearable for the next generation."
Chancellor Angela Merkel's new government, due to be officially sworn in on Wednesday, is poised to rely mainly on billions of euros (dollars) in tax cuts to boost Europe's ailing powerhouse despite soaring national debt levels. The new coalition government in Berlin has pledged some 24 billion euros (36 billion dollars) in tax relief over the next four years, beginning in January 2010.
But in comments due to be published on Wednesday, Juncker warned: "The new ... federal government must realise that it can not continue like this." "If German fiscal policy loses its solidarity, then other EU states will also begin to take liberties," he said. Under EU rules, governments must keep public deficits below three percent of gross domestic product (GDP) and public debt below 60 percent of GDP.