Bonn Nears Deal On Plan To Cut Deficit

The German coalition government is close to an agreement on a series of measures that would help reduce budget deficits in the coming years without raising taxes, several German newspapers reported on Thursday.

The dailies Die Welt and Handelsblatt said that the coalition had agreed to close tax loopholes for corporations while at the same time delaying until 2003 plans to tax bonus pay for workers for overnight, Sunday and holiday shifts.

The papers said the coalition was also near agreement to changes on taxation for life insurance and tax deductions for homeowners. The changes should be included in a draft bill that the coalition will put to the Bundestag (lower house) on June 26. Chancellor Helmut Kohls Christian Democrats have been squabbling with their centrist Free Democrats (FDP) coalition partners over budget deficits for 1997 and 1998.

 

The FDP has firmly rejected any proposal to raise taxes to plug the gaps. Handelsblatt said the the coalition would close the tax loopholes by placing limits on the losses companies could carry forward into future years to set off against profits. In another report, the Berliner Zeitung daily said the CDU and its Bavarian sister party Christian Social Union (CSU) were considering a plan to move forward by one year to 1998 part of a major tax reform that would cut in half to 3,000 marks ($1,740) the tax-free limit for investment income.

The paper said the proposal, which means investment income exceeding 3,000 marks for unmarried people would now be taxed, would raise about 3.3 billion marks per year for the government. The Berliner Zeitung said that was one of 10 parts of the tax reform plan the coalition is considering to bring forward by one year. It said the other nine measures affect companies.

The FDPs budget expert Juergen Koppelin said that there was room for spending cuts in the defence budget. In an interview in the Neue Osnabruecker Zeitung daily, Koppelin said he believed Defence Minister Volker Ruehe could reduce the number of conscripts each year by 20,000 and the number of reserve officers by 1,000.

That would save 710 million marks per year.

Koppelin criticised Ruehe for dumping unpaid bills worth two billion marks from 1996 into the 1997 budget year and warned that the FDP would not tolerate such budgetary tricks any more.

He also repeated his doubts about whether Germany could afford the four-nation Eurofighter project in the light of the current budget troubles.