BERLIN -(Dow Jones)- Germany's ruling coalition parties agreed in principle Monday to a second fiscal stimulus plan worth around EUR50 billion over this year and next in a bid to cushion the country against the worst economic downturn in decades, a senior coalition official said.
However, coalition members remain divided over whether tax cuts would an effective tool in reviving an economy in recession.
"We have agreed that the volume of what we will take into our hands for the years 2009 and 2010 will be around EUR50 billion," said Peter Ramsauer, who leads the Christian Social Union's members in parliament.
Frank-Walter Steinmeier, foreign minister and the Social Democratic Party's candidate for chancellor, said he's optimistic that an agreement will be reached by next Monday's meeting of the ruling coalition committee, which consists of the Social Democratic Party and conservative parties.
At their meeting Monday, senior ruling coalition officials agreed to boost investment in infrastructure projects, offer consumption incentives and ease Germans' overall payroll taxation burden. They also agreed on measures to prevent job cuts.
However, disagreement remains over possible tax cuts, with the conservative parties pushing for tax cuts while the SPD favored higher taxes for top income earners.
"Our opinion is not that we should agree on tax cuts for those with high incomes," said Peter Struck, parliamentary floor leader of the SPD. "We want to find a solution where those who earn well will help fund the costs of this overall action."
Volker Kauder, the conservative parties' parliamentary floor leader, said that differences on taxation remained.
A final deal on the stimulus package is expected next week. The ruling coalition parties are scheduled to meet again Monday, and Chancellor Angela Merkel will present the plan to the lower house of parliament two days later.
Germany's second fiscal stimulus plan would follow the EUR31 billion package adopted by the cabinet in November. Critics have said this package is insufficient as it provides a net stimulus of just EUR4 billion. An additional EUR7.5 billion will come from recent tax breaks for commuters that was reinstated by the constitutional court.
Ahead of the meeting earlier Monday, Merkel said "safeguarding jobs and promoting investments" are at the core of the stimulus plan.
"As part of this, we have to think about how to ease the burden of the people, and the question of taxes and social security costs will play a role," Merkel said.
In a meeting Sunday, the conservative parties agreed to seek an increase in the personal tax exemption to EUR8,000 annually from EUR7,664 currently and to increase investment in public infrastructure projects.
But the Social Democrats have opposed any tax cuts and have called for a temporary increase of 2.5 percentage points in the tax rate for top earners to 47.5%. The party has also called for a cut in health-care premiums and paying a bonus of EUR200 a child. It has proposed helping the ailing auto industry by paying owners of old cars to get rid of them. The Social Democrats agree with the conservative parties on increasing public investment.
The SPD had previously proposed a second fiscal stimulus plan worth a combined EUR40 billion in 2009 and 2010, while the conservative parties had called for a package worth around EUR50 billion.
-By Andrea Thomas, Dow Jones Newswires; +49 (0)30 2888 4126; andrea.thomas@dowjones.com
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Publié le 05 janvier 2009 Copyright © 2009 Dowjones