Germany’s finance minister said on Wednesday that the country’s economic situation was deteriorating and the outlook was fragile in Europe’s largest economy, defending his plans to raise the income tax exemption limit to counter rising inflation.
The German economy stagnated in the second quarter of the year, with the outbreak of war in Ukraine, rising energy prices, the pandemic spreading and supply disruptions pushing it to the brink of deflation. The inflation rate was 8.5 percent.
“The economic outlook for our country has become fragile,” said Finance Minister Christian Lindner of the Liberal Democratic Party, while politicians from the two largest parties in the ruling coalition criticized his inflation reform bill.
“The economy is deteriorating,” he told reporters in Berlin.
Presenting his plans for tax reform, Lindner said that if the government did nothing, 48 million people would face effective tax increases of 10 billion euros ($10.2 billion) from Jan. 1 next year due to rising inflation.
He added that he wanted to avoid “latent tax increases” through his plans, which he said would relieve “the broad community”.
But the plans have already come under fire from the two largest parties in the coalition government, the Social Democrats, Chancellor Olaf Scholz’s party, and the Green Party.
Achim Post, deputy head of the SPD’s parliamentary group, told Reuters that Lindner’s plans “remain to be improved” and that the aid should “primarily target low- and middle-income people”.
“The proposed increases in benefits and basic tax-free child benefits are going in the right direction, but they are not enough,” he added, and suggested direct payments instead for the assistance to target small and middle-income families.
The broad tripartite government coalition, which took power last December, is the first at the national level. Tension also emerged between the partners over Schultz’s leadership regarding the handling of the Ukraine crisis.
(Reuters)
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