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Germany

German Bundestag agrees on austerity measures

Germany’s center-right coalition government with its parliamentary majority has approved a wide range of social welfare cuts and tax hikes as part of a sweeping austerity package.

100-euro note, locked up and chained

The austerity measures passed but remain controversial

The Bundestag on Thursday passed a large portion of the government's controversial 80-billion euro ($110 billion) cost-cutting measures, a move that will likely affect business, industry and consumers, families, the unemployed and welfare recipients.

Government expenditures will be slashed for the so-called family allowance and subsidies for "Hartz IV" welfare recipients. In addition, a new surcharge on air travel and a sharp increase in the tobacco tax have been approved. Business and industry will also face cuts in the subsidies to offset the environment tax on energy consumption.

The air travel surcharge next year will add between 8 and 45 euros to the price of an airplane ticket, depending on the destination. The finance ministry expects to take in a billion euros annually from the air surcharge alone.

Chancellor Angela Merkel

Merkel's majority ensured the drastic budget reforms were passed

The tobacco tax is expected to raise an additional 200 million euros.

The wealthy will no longer receive the family allowance, if their incomes exceed 250,000 euros for singles and 500,000 for married couples.

The government expects savings of 3.5 billion euros next year, 5.4 billion in 2012 and nearly 5.7 billion in 2013.

Furthermore, banks face tougher risk management guidelines and will have to retain a larger amount of capital liquidity to cover potential defaults.

The opposition blasted the measures as a one-sided package that penalizes the poor.

Author: Gregg Benzow (AP, Reuters)
Editor: Andrew Bowen

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