German Chancellor Angela Merkel launched her re-election campaign on Monday with promises her coalition partners dismissed as unaffordable and even one party ally said would never see the light of day. Merkel told leaders of her Christian Democrats (CDU) and their Christian Social Union (CSU) sister party that if she is re-elected she wants to raise child benefits, pensions for women with children and pensions for low-income workers.
At the same time as preaching austerity to other euro zone nations struggling under high debt, Merkel said she wanted to see Germany invest billions more in infrastructure projects on top of the other multi-billion euro promises. The pledges were criticised by the opposition and German media as expensive voter give-aways. One newspaper, Bild, estimated the increase in child benefits and pensions would total 15 billion euros per year. Most proposals have little chance, Bild said.
Merkel and CSU chairman Horst Seehofer, the Bavarian state premier who is also up for re-election in September, said there would be no tax increases to pay for the promises. The German economy is in solid shape with low unemployment. Party leaders believe tax revenues will rise to 700 billion euros in 2017 from 600 billion in 2012 so no tax increases are needed. The government expects to have a balanced budget in 2014 and could even post a surplus soon.
"That would be the wrong way to go," said Merkel, referring to tax increases. She learned her lesson after nearly squandering a sure win in 2005 by pledging to raise value added tax (VAT) to 18 percent from 16 percent before the vote. The conservatives were at 42 percent in polls just before the 2005 election but fell to 35.2 percent, in part due to Merkel's tax increase pledge, and were forced into an unwanted grand coalition with the centre-left Social Democrats (SPD).