Merkel's party mulls tax cut in election platform, opposes VAT increase

"It is necessary as stimulus for jobs, growth and investment."

Merkel 298.88 (photo credit: AP)
Merkel 298.88
(photo credit: AP)
Leaders from Chancellor Angela Merkel's Christian Democrats and their Bavarian-only sister party met Sunday to agree on an election program, with a middle-class tax cut central to their discussions. Going in to the meetings in Berlin, Horst Seehofer, head of the Bavarian Christian Social Union, said both parties had already agreed that lower taxes were needed. "It is necessary as stimulus for jobs, growth and investment," he said, adding that cuts should be implemented regardless of whether the economy is growing. The CDU and the CSU are campaigning as a single conservative bloc and have a strong lead over other parties in the polls before the September 27 elections. On Saturday, Merkel ruled out increasing value-added tax if returned to office in September, despite calls to do so from within the ranks of her party. "There will be no increase [of VAT] with me in the next legislature period," Merkel was quoted as saying by the Bild am Sonntag newspaper. Guenther Oettinger, Christian Democratic governor of Baden-Wuettemberg state, had suggested raising VAT from 7 percent to 9.5%. Merkel was quick to shoot that down, saying that "any discussion about VAT is damaging to the economy." "Germany needs to move quickly out of the crisis," she said. "To do that we need tax breaks, not hikes." Germany, Europe's biggest economy, went into recession last year as the global crisis sapped demand for its exports. The country's central bank predicted this month that the economy will shrink by 6.2% this year and stagnate in 2010. Research institutes have issued even more pessimistic predictions.