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Germany

German Parties Stop Dancing Around Economic Issues

Members of Germany's Social Democratic Party called for curbs on executive pay and more regulation of financial markets. The demands raise the pressure on Chancellor Merkel as a week of economic policy review begins.

Tango dancers

The CDU and SPD are aiming for each others' toes seven months before a parliamentary election

Both Chancellor Angela Merkel's Christian Democratic Union and the Social Democrats continue trying to show that another financial crisis would not occur on their watch if voters were to give them the nod in September's parliamentary election.

Currently in a tenuous "grand coalition," the parties' leaders are scheduled to meet this week to discuss ways to ensure social justice remains a part of the German economic system after they hash out their parties' plans in internal meetings starting Monday, March 2.

The SPD has pushed for tougher steps against executives who risk the well-being of their company and other employees in pursuit of steep profits. The party last week called for a tax on stock market trading to be implemented on the EU level to get around resistance from the CDU.

SPD: Rich will have to pay more

A walet filled with money

The SPD wants the rich to dig deeper into their wallets

Such a tax, based on a British model of 0.5 percent of the value of the market trade, would lower speculative investing and provide the state with money from the industry responsible for the financial market crash and which is now receiving billions of euros worth of aid from the government, according to SPD members.

SPD leaders would also discuss salary caps and accountability standards for managers, additional oversight of financial products and measures targeting tax havens, according to SPD head Franz Muentefering.

"We need tougher rules, and quickly," he said, according to Der Spiegel newsmagazine. "The coalition must do this before the election."

He added that if the Christian conservative parties did not lend their support the proposals, social justice would become a central plank in the SPD's campaign platform. Higher taxes for rich Germans, which most conservatives oppose, could also become a necessity, Muentefering said.

"The rich will have to pay more, otherwise we won't get the money needed for the solidarity of the social state," he said.

CDU: Tax hikes a knee-jerk reaction

Muentefering holding a beer

Muentefering's SPD hasn't proposed raising the beer tax ... yet?

The Christian conservatives' parliamentary group leader, Volker Kauder, said he wasn't surprised by the SPD's call for higher taxes.

"The Social Democrats can't think of anything besides raising taxes," he told Monday's Hamburger Abendblatt, adding that the CDU and its Bavarian sister party the Christian Social Union would not agree to tax hikes.

Foreign Minister Frank-Walter Steinmeier, the SPD's candidate for the chancellery, said he would show the public that his party had learned from the ongoing crisis.

"This is about fairness in our society," Steinmeier said, adding he thought Wednesday's meeting could agree on executive pay, but that issues like a tax on stock market trading would be more difficult.

Salary caps

The SPD has also proposed capping executive salaries at 1 million euros and giving companies' supervisory boards, which tend to be less driven by short-term profits, the ability to decide on executives' pay and bonuses. The CDU would like stockholders to decide on the size of bosses' paychecks.

Angela Merkel at a press conference

"I want to win the election by this much"

Merkel has long talked about tighter financial market regulation, but some in her party are against too much regulation and still believe firmly in the supremacy of the market.

Economy Minister Karl-Theodor zu Guttenberg rejected SPD demands for higher taxes for the rich and a tax on stock market trading.

"I simply do not understand how, at this time, one can agonize over new taxes," Guttenberg told Bild am Sonntag newspaper.

Tax haven agreement?

Plans to locate money in kept by Germans in foreign tax havens if likely the agenda point where agreement between the two parties is most likely. Finance Minister Peer Steinbrueck (SPD) is set to discuss measures that would make tax havens less attractive to Germans.

That's a move CDU finance expert Otto Bernhardt told the German news agency dpa his party would have no problem with.

"We also want to see these tax oases dry out," he said, before adding that he was unconvinced by Steinbrueck's proposals.

sms/rtrs/afp/dpa

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