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German government pledges to cut taxes, bureaucracy

August 30, 2023

The leaders of Germany's ruling coalition sought to project unity during a two-day retreat outside Berlin. Chancellor Olaf Scholz announced a major tax cut.

Finance Minister Christian Lindner (left), Chancellor Olaf Scholz and Economy and Climate Minister Robert Habeck attend a press conference
Lindner (left), Scholz and Habeck briefed the press after a closed Cabinet meetingImage: LISI NIESNER/REUTERS

Germany's ruling coalition pledged to stimulate economic growth by announcing tax cuts amounting to about €7 billion ($7.62 billion) per year.  According to the government, the "Growth Opportunities Law" is directed at small and medium-sized businesses.

"We have a situation where growth is not as strong as we would like, so, with these measures, we want to… encourage companies to invest now," Chancellor Olaf Scholz said, flanked by his Economy Minister Robert Habeck and Finance Minister Christian Lindner at a press conference on Wednesday.

Germany announces €7 billion corporate tax cut

The politicians addressed the public together following a two-day retreat at the Meseberg Palace outside Berlin. The cabinet summit was seen as an attempt to end semi-public friction between Scholz's center-left SPD, Habeck's Green party, and Lindner's business-friendly FDP.

Government responding in an 'agile' fashion

Linder referenced the in-fighting by saying that the government sometimes "made noise" but there were always results. All three of the ruling parties are under increased pressure due to German economy stagnating amid prolonged geopolitical tensions.

"This government knows the situation, the state of the economy, and we act, react to it in an agile fashion," Linder said.

In addition to the tax cuts, the three leaders also agreed to cut down on bureaucracy and improve digitalization.

'Out of doubts there will be fear'

Habeck, from the environmentally friendly Green party, praised the anti-bureaucracy initiative as a push towards a "modern state." He also said "optimism" was needed to reach those goals.

"If that doesn't happen, doubts will grow, and out of doubts there will be fear, and out of fear, fear mongering, and then populism will profit," he said, in what could be seen as a reference to the far-right AfD and its increased acceptance among the mainstream voters.

Habeck also seemed keen on ironing out previous disagreements, noting that the summit showed that "different points of view are a strength" and that "compromises are a good thing."

Scholz wants less noise

The current ruling coalition was formed in late 2021, with Olaf Scholz succeeding Angela Merkel who ruled the country for 16 years. Despite his extensive political experience, Scholz has struggled to control his rivals inside the coalition, leaving many wondering if his government will last until the next scheduled election in 2025.

Chancellor Scholz presents his vision for the EU's future

Answering a question by DW's Michaela Küfnerr on Wednesday, Scholz referenced the remarks made by his finance minister, saying that his government should continue to work "with silencers."

"Nothing else should be heard," he said.

dj/jcg (Reuters, DPA)

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