Pressure piles on Merkel over economy
Reuters | Monday, 08 December 2008German business leaders and senior politicians called on Chancellor Angela Merkel to do more to boost Europe's biggest economy at the weekend, raising the pressure on her to introduce a fresh set of measures.
Germany's uneasy ruling coalition of Merkel's conservatives and the Social Democrats (SPD) has pushed through a stimulus package it says is worth 31 (NZ$75.75) billion euros, or about 1.3 percent of gross domestic product, over two years.
But more is needed to boost confidence and enable Germany, the world's biggest exporter of goods, to withstand the effects of what many economists say will be the country's deepest recession since the end of World War Two.
Options include tax cuts, which Merkel has ruled out until after September's election, spending vouchers to boost domestic consumption and investment in infrastructure programmes to protect jobs.
"We must prepare intensively so we can act quickly and effectively," SPD Chairman Franz Muentefering told Focus magazine. "In the spring, people will rightly be saying: 'Stop scratching your heads. Just make sure something good is done'."
Merkel, accused by some of her European neighbours of dithering and failing to respond quickly enough to the financial crisis, has said she will review the situation in January.
The steps already passed by parliament, most of which will take effect on Jan. 1, include funding for building projects, cutting car tax and making it easier for business to get credit.
But Merkel, who has in the last two years enjoyed record popularity ratings, is losing the confidence of Germans less than a year before the election.
An Infratest dimap poll showed last week that only 52 percent of Germans asked believed Merkel would ensure there was an economic upturn in Germany, a 17 point drop from a year ago.
As calls for more action mount, German commentators believe a new programme is inevitable.
SPD Finance Minister Peer Steinbrueck has also ruled out a new economic programme before Easter, according to Der Spiegel weekly, but may be willing to do more in the longer term.
"Whether and how far we will next year have to expand what we have already agreed upon depends on concrete developments," Steinbrueck said at an event in Hamburg on Sunday.
But business leaders are clamouring for immediate action.
"We must at all costs make sure the crisis does not turn into a devastating conflagration," said Martin Winterkorn, Chief Executive of Volkswagen. "We are in an exceptional situation, and traditional political and economic instruments will not be enough," he told Der Spiegel.
Werner Wenning, head of drugs maker Bayer echoed that view.
"The government should do more, but with well-considered initiatives which support growth and strengthen competition," he told the weekly.
The magazine quoted other business leaders urging the government to cut sales tax, reduce the tax burden on low and mid-level earners and invest in more infrastructure projects.
Some of Merkel's own conservatives, including Economy Minister Michael Glos, are also pressing for tax cuts.
"A reduction for normal earners before the election would be the right signal," Glos told Bild am Sonntag newspaper.
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