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Germany

German austerity plan faces widespread criticism

The government's austerity plan has triggered widespread criticism in Germany. Few doubt that cuts are neccessary, but many say that Berlin is cutting in the wrong places.

Euro bills with a chain and a lock

The question is not whether but where to save money

It didn't take long after the government presented its austerity plan for the opposition to cry foul over the proposed spending cuts.

Opposition parlimentarians quickly found themselves on the same page, arguing that Chancellor Angela Merkel's center-right coalition was trying to make savings by taking money mostly from the poor.

Many think-tanks too, refused to buy the government's assertions that the pain was being spread throughout society in a just way.

"Of course the government is saying that everyone has to pay for it. But is that really justified? After all, what we're paying for is basically the financial market crisis," said Gustav Horn of the Hans Boeckler Foundation, which is supported by German trade unions.

"The German state budget was balanced in 2008 before the crisis began and the deficit came only then," Horn told Deutsche Welle.

"So if I would like to see people pay for it, I would of course like to see that people in the financial market sector would have to pay for it - that the wealthy people have to pay for it and not those who already don't have much money."

Angela Merkel with journalists

Merkel said she had no choice but to push through with the cuts

Not surprisingly,Germany's trade unions have also condemned the savings package, accusing Berlin of sparing the well-off. The major point of criticism is the government's decision to not increase taxes for the country's top earners or for businesses.

"We can no longer afford to be a country with such low taxes in that respect," Frank Bsirske of the Ver.di union said.

"I think that this is where we need to focus on. If we had the same as the average tax rates from other eurozone countries on inheritances and property, we would have 33 billion euros more in tax revenues each year."

Keeping things in balance

Those defending the austerity package argue that the corporate sector will be made to share the burden. Airlines will be affected, and so will be financial transactions and operators of nuclear plants.

Employment Minister Urusla von der Leyen came out to support the package despite the fact that the cuts to social benefits will all be affecting her domain.

a graph of Germany's debt

Germany's debt load is projected to increase

"My ministry makes up half of the annual budget," she says. "And still I only have to contribute one third to the austerity package. So this shows that we're keeping things in balance. Businesses have to pay, the government has to pay and so we have also consolidated the social sector."

But critics warn that it's only the cuts to the social security that are precisely laid out while cuts to the business side are anything but definite yet.

Several of the savings plans are conditional upon external factors. The financial market transactions tax, for example, is dependent upon an international agreement on the issue.

"The probability that we will see an international agreement on a tax on financial transactions is rather low. So I'm not convinced that this will actually happen," Horn said.

Economy on track to recovery

Other analysts however point out that putting too much pressure on Germany's economy could stifle the budding recovery after the global financial crisis.

Job center window

The unemployed are armong those who will see their benefits cut

The country's chamber of commerce estimates, that by the end of the year, the economy will have made it half-way out of the crisis. This fragile upturn of the engine of Germany's prosperity is what many warn should not be jeopardised.

The government is standing firm on its plans to save a total of 80 billion euros ($96 billion) over the next years. Vice Chancellor and Foreign Minister Guido Westerwelle defended the plan saying that he had expected a heated debate over the issue.

"This is a program that is just to both the economy and the social welfare state. Nothing is less socially just than to allow public finances to hit the wall."

Author: Andreas Illmer
Editor: Chuck Penfold

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