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Business

Opposition Grills Finance Minister

German Finance Minister Eichel has denied accusations that he deliberately kept the full extent of Germany’s massive budget deficit under wraps before elections last September, before a special investigation committee.

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Feeling the heat -- German Finance Minister Hans Eichel (center) faces the parliamentary investigation committee

Two months after a special parliamentary investigation committee was instituted by the conservative German opposition to probe whether Chancellor Gerhard Schröder’s Social Democratic-Green government had deliberately misled voters after parliamentary elections last September, the so-called "lie commission" has just grilled one of the most high-profile members of Schröder’s cabinet -- Finance Minister Hans Eichel.

The commission was established to examine electoral statements on the state of the budget, the economic situation of the state health insurance and pensions system as well as adherence to the EU Stability Pact criteria made during the election campaign last year before parliamentary elections on Sept. 22, 2002.

Hans Eichel stands accused of intentionally concealing Germany’s staggering 12 billion euro budgetary deficit and the fact that Germany would not be able to meet the terms of the stability and growth pact from the public during last year's election campaign for fear of jeopardizing his party’s chances at the polls.

Der alte neue Finanzminister

German Finance Minister Hans Eichel

Eichel has denied all accusations and defended his stance in the last election year. "I stand by all the political decisions that I have made," he said. The minister pointed out that the decisive question for the investigation committee was not which facts the government had relied on, but rather how the government had interpreted them. Eichel indicated that economic development for the year 2002 had turned out much worse than expected.

Damning statements by finance ministry officials

However, at the beginning of the hearing, Eichel admitted that he was aware of the warnings issued by officials within his finance ministry about the state of the economy since mid 2002.

The minister was reacting to concrete statements made by finance ministry officials to the investigation committee earlier this year about the disastrous economic situation. They are believed to have revealed that a division head in the ministry had predicted as early as July 2002 that Germany would exceed the 3 percent budgetary deficit limit imposed by the stability pact by 0,3 to 0,4 percent and had passed on the information to the concerned department head.

On the same day, an official in charge of estimating tax revenues is said to have alerted the finance minister with the news that the revenue shortfall would amount to 10 billion euro -- a far greater shortfall than expected.

Last November, Brussels issued Germany an embarrassing formal warning for failing to keep its ballooning budget deficit under the set 3 percent of gross domestic product as laid out by the Stability and Growth Pact.

Opposition sees itself vindicated

The incriminating statements by finance ministry officials have provided the opposition with fresh ammunition to launch an attack on Schröder’s government.

Opposition Christian Democratic Union (CDU) ombudsman, Peter Altmaier sharply criticized Eichel in a recent radio interview. He said that Eichel had concealed a budgetary deficit of 12 billion euro for eight months till the elections, a fact Altmaier said was a clear violation of his duties as laid down in the constitution as well as his oath of office.

He said that Eichel had had enough indications last summer that Germany would not meet the Stability Pact, but still declared before the elections that Germany would not exceed the deficit limits of the pact. Altmaier has now called for Eichel’s resignation: "He (Eichel) just has to clear the air now," he said.

Eichel sticks to his guns

Eichel, for his part has vehemently stuck to his stance and has used the argument that unexpectedly bad economic developments in the tax month September could in no way have been foreseen by the government .

"I strictly deny the impression given by the opposition of electoral fraud with respect to the 3 percent deficit limit," he said. The minister claimed that it was only in mid October last year that the government realized revenue estimations from May were way off mark. Early last year, the German government had predicted economic growth of 0,75 percent for the year 2002 with corresponding tax revenues. However, in reality growth did not exceed 0,2 percent last year.

Eichel also said that he felt it would have been irresponsible on his part to have prematurely voiced the fear in August last year that Germany would not be able to uphold the Stability Pact. As proof that he believed that Germany would stick to the pact, the minister seized upon his approach during the flood catastrophe last summer, when he refused to increase Germany’s debt through further borrowing.

Own party not satisfied

Though Eichel still faces a largely skeptical opposition despite his statements in front of the "lie committee", there are doubting voices even within his own party ranks.

The chairman of the investigation committee and member of the ruling Social Democratic Party (SPD), Klaus Uwe Benneter said in a television interview that he expected a plausible explanation from Eichel. "It’s about whether Eichel consciously lied to all of us -- the public and the German parliament or whether it’s a matter of false estimation," he said.

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