Bonn Split On Waigels Budget Plans

Social Democrats, Greens seek finance ministers dismissal

German government was deeply divided yesterday over Finance Minister Theo Waigels plans to fill gaping budget holes, but Waigel said there was no danger the centre-right coalition would collapse.

Chancellor Helmut Kohls ruling coalition said it would push ahead with its controversial plan to revalue Bundesbank gold and currency reserves even though it failed to agree at a Sunday night crisis meeting on ways to plug growing budget shortfalls.

There was more bad news for the beleaguered Waigel in Bonn yesterday when the two main opposition parties, the Social Democrats and the Greens, launched a united bid to bring about Waigels dismissal through a parliamentary vote.

 

Waigel, who avoided the press after a four-hour meeting at Kohls office, wants to revalue the Bundesbanks gold and currency assets despite objections from the powerful central bank, which sees the plan as an assault on its independence.

Waigel also evaded the controversial subject on his way into a meeting of the Christian Social Union (CSU) in Munich.

I cannot rule out tax increases, Waigel said, a stance firmly opposed by the junior coalition partners the Free Democrats (FDP). Waigel faces a 15 billion mark tax shortfall this year and higher-than-forecast spending because of high unemployment. His plan to reap 20 billion marks from the revaluation of Bundesbank assets could partly ease the governments debt burden and help Germany to meet the single currency entry criteria.

FDP leader Wolfgang Gerhardt said the coalition was in an extremely difficult position and that each side should be careful in what it expects of its partner. FDP leaders have suggested that the future of the coalition could be at stake if Waigel insists on tax rises.

The situation is so difficult because the FDP has dug itself into such an unconditional position on no tax increases, said Friedrich Merz, a financial expert for the CDU, in an interview with HR radio.

We can no longer accept the fact that the FDP declares what is not possible and then leaves the rest for the CDU/CSU to deal with, Merz said. This is not the way a coalition should work.

Despite withering criticism from the opposition, newspaper editorials and a small number of deputies from the governing parties, the coalition said it was determined to march forward with the plans to revalue Bundesbank assets this year. On the question of the revaluation, we are still unified in the belief that this is right, Chancellery Minister Friedrich Bohl told journalists outside Kohls office early on Monday.

Bohl said Waigel would state the governments position on the plan in a special debate in parliament on Wednesday and would also discuss the legal text for the proposed bill on revaluation with the Bundesbank.

Speaking to journalists in Munich, Waigel said the coalition agreed it would accelerate efforts to privatise state holdings.

The coalition was united in its opinion that every opportunity to privatise should be used, Waigel said. But Bohl revealed an added dimension to the governments troubles, pointing out there could still be problems balancing the 1997 budget even if it could raise funds as planned through an accelareted privatisation of assets .

Some members of Kohls coalition also voiced opposition to Waigels revaluation plan, raising the possibility that the veteran chancellor might not be able to muster a majority to push the controversial measure through parliament.

FDP budget expert Juergen Koppelin urged the government to retreat from what was shaping up to be an unprecedented clash with the central bank.

Juergen Augustinowitz, a young Christian Democrat who has already announced he will not vote for legislation opposed by the Bundesbank, said he was sure he would not be alone. There will certainly be more sceptics who havent outed themselves yet, one senior CDU official told Reuters. He added there were also numerous deputies in the FDP who oppose Waigel and would relish the chance to embarrass him in parliament.

We have to take this (threat) very seriously, he said.