Merkel's Party Wants Tax Cuts to Fend Off German Slowdown

(Bloomberg) -- Germany should try to head off an economic slowdown by easing the tax burden on companies, according to the new chairwoman of Chancellor Angela Merkel’s Christian Democrats.

Germany’s federal budget surplus widened to more than 11 billion euros ($12.6 billion) last year, fueling debate about tax cuts within the ruling coalition of Merkel’s conservatives and the Social Democrats. SPD Finance Minister Olaf Scholz has raised the possibility of easing the tax burden in the event of a slowdown but the CDU wants to act preemptively, Chairwoman Annegret Kramp-Karrenbauer said.

“When the finance minister has said that he sees room for tax cuts if economic growth cools then we say very clearly that the tax cuts should be made to prevent a cooling of growth happening at all,” Kramp-Karrenbauer said Monday in an interview with Welt TV. “This must be discussed in the coalition.”

The wrangling over taxes is another sign of coalition discord as Germany heads toward May’s European elections and a string of regional votes later this year. If the SPD is unable to reverse its slump in support, it may decide to pull the plug on the government, possibly triggering an early general election.

Kramp-Karrenbauer reiterated the CDU’s proposal to completely do away with the “Soli” -- a levy to help finance German reunification. The coalition agreement foresees scrapping the tax for everyone except the top-earning 10 percent by 2021.

“We have made our decision on that, the Social Democrats have a different position,” Kramp-Karrenbauer said. “In that sense, it will remain an issue within the coalition.”

©2019 Bloomberg L.P.