Duits bezuinigingsplan voorbeeld voor andere EU-landen (en)
German chancellor Angela Merkel i on Monday (7 June) announced spending cuts to the tune of €80 billion in the coming four years, in an example to other European economies struggling with deficits.
"Around €80 billion must be saved until 2014 in order to put our financial future on a solid footing," Ms Merkel told journalists at a press conference in Berlin, after lengthy coalition talks which forced her to postpone a previously scheduled meeting with French President Nicolas Sarkozy i.
The two leaders were due to co-ordinate their positions ahead of an EU summit on 17 June and to show that the Franco-German "EU motor" is still working, after a series of disagreements over the multi-billion-euro bailout packages for Greece and the eurozone itself.
But in the end, the signal of fiscal discipline was more important for Ms Merkel than the show of Franco-German entente.
"Germany, as the biggest economy, has the outstanding task of setting a good example. I think recent months have shown, in the case of Greece and other eurozone countries, how extraordinarily important sound finances are," Ms Merkel said.
Germany's budget deficit reached 3.1 percent of GDP last year and is expected to reach five percent by the end of 2010.
The cuts proposed by Ms Merkel are based on a constitutional clause capping the country's deficit at 0.35 percent of GDP by 2016, a mechanism she would like to see replicated in all euro-countries.
Mr Sarkozy last month announced a similar clause, but without binding targets.
The bulk of Germany's planned cuts are taken from social benefits, such as long-term unemployment entitlements and business subsidies, and from the public sector, including axing 10,000 government jobs in the next four years. Military spending will also be reviewed and could see cutbacks of 40,000 posts.
Ms Merkel's junior coalition partner, the Liberal Free Democrats (FDP), had pushed against any increases in income tax or VAT. But new levies on nuclear power companies and air passenger taxes may be put in place. The only spending areas left untouched are education and research.
"These are serious and difficult times," the German chancellor said. "We can't afford everything we would like if we want to be able to shape our future."
The German opposition has slammed the package as "proof of failure."
According to Social-Democratic leader Sigmar Gabriel, Ms Merkel's government has been too weak towards its business contacts, failed to tax the rich and is now running austerity measures at the expense of families and the unemployed.
Green leader Claudia Roth also criticised the program as being characterised by "active protection of wealth."
The proposals still need the approval of the German parliament, likely to come up in the autumn, when some details may change.
Several EU countries have announced similar austerity programmes, with Spain agreeing deep cuts last week and Greece having agreed to far-reaching reforms earlier this year when it signed up to an EU-IMF rescue package.
In new EU member state Romania, which is also being propped up by an IMF loan, the government slashed 25 percent of wages for state employees and 15 percent of pensions and unemployment benefits.
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