BERLIN: German Chancellor Angela Merkel will on Monday, June 7 agree a package of budget cuts with her cabinet and outline her policy agenda through 2014 in a series of steps she hopes will help shore up the euro and her own authority.
Ministers resumed the crunch talks on Monday after working late into Sunday night. Merkel was expected to announce the results of the 2011 draft budget and financial planning for the next four years in the early afternoon.
Some commentators say the up to '10 billion (US$11.94 billion) of annual cuts, along with some limited tax rises, will be Germany's biggest austerity programme since World War II.
Merkel wants to set an example of fiscal tightening to try to restore investor confidence in the euro shaken by bulging deficits in Greece and other euro zone states. But she faces a delicate balance to ensure her cutbacks do not choke off a fragile recovery in Europe's biggest economy.
Germany's public deficit is likely to exceed 5% of gross domestic product (GDP) this year. Although that is significantly lower than levels in some other euro zone states, that still exceeds the EU's 3% cap.
Merkel's political authority is also at stake.
Dogged by a slump in her conservative party's popularity and accused of weak leadership in the euro zone crisis, she needs to regain the political initiative and come up with a sustainable package that voters will swallow.
Decisive juncture
"This cabinet meeting will give an important direction for Germany in coming years, years which will be decisive," Merkel told reporters on Sunday just before the start of the talks.
"We can only spend what we bring in."
She has promised to protect education and pensions but has earmarked social security spending as an area for cuts.
Selected reductions in unemployment benefit look likely as do cuts to parental benefit for the unemployed, a move that could save about '400 million.
In addition, 10,000 civil service jobs will go, German media say, and cuts in the defence budget of about '600 million for 2011, rising to '1.1 billion in 2012, have been earmarked.
Also likely is a tax on the burning of nuclear fuel rods for companies benefiting from a planned extension of the lives of some nuclear plants. Media have reported this could raise about '2.3 billion a year.
Once cabinet colleagues have agreed the 2011 draft budget, Merkel has to make sure they get passed by the lower and upper houses.
This is no longer a given ' Merkel's centre-right coalition with the Free Democrats (FDP) lost its majority in the Bundesrat upper house after a drubbing in a regional vote last month.
Compounding her misery, German media outlets, including weekly Der Spiegel and top-selling Bild am Sonntag, have backed the opposition parties' candidate for president, meaning she may face a battle to get her choice elected to the post on June 30.
The opposition Social Democrats (SPD) and Greens put forward Joachim Gauck, a charismatic former human rights activist and pastor from eastern Germany who fought communism, to challenge Merkel's candidate, the conservative Christian Wulff.
Merkel nominated Wulff, the Lower Saxony state premier, last week as her center-right coalition's candidate for the largely ceremonial post after the shock resignation of Horst Koehler. ' Reuters
Ministers resumed the crunch talks on Monday after working late into Sunday night. Merkel was expected to announce the results of the 2011 draft budget and financial planning for the next four years in the early afternoon.
Some commentators say the up to '10 billion (US$11.94 billion) of annual cuts, along with some limited tax rises, will be Germany's biggest austerity programme since World War II.
Merkel wants to set an example of fiscal tightening to try to restore investor confidence in the euro shaken by bulging deficits in Greece and other euro zone states. But she faces a delicate balance to ensure her cutbacks do not choke off a fragile recovery in Europe's biggest economy.
Germany's public deficit is likely to exceed 5% of gross domestic product (GDP) this year. Although that is significantly lower than levels in some other euro zone states, that still exceeds the EU's 3% cap.
Merkel's political authority is also at stake.
Dogged by a slump in her conservative party's popularity and accused of weak leadership in the euro zone crisis, she needs to regain the political initiative and come up with a sustainable package that voters will swallow.
Decisive juncture
"This cabinet meeting will give an important direction for Germany in coming years, years which will be decisive," Merkel told reporters on Sunday just before the start of the talks.
"We can only spend what we bring in."
She has promised to protect education and pensions but has earmarked social security spending as an area for cuts.
Selected reductions in unemployment benefit look likely as do cuts to parental benefit for the unemployed, a move that could save about '400 million.
In addition, 10,000 civil service jobs will go, German media say, and cuts in the defence budget of about '600 million for 2011, rising to '1.1 billion in 2012, have been earmarked.
Also likely is a tax on the burning of nuclear fuel rods for companies benefiting from a planned extension of the lives of some nuclear plants. Media have reported this could raise about '2.3 billion a year.
Once cabinet colleagues have agreed the 2011 draft budget, Merkel has to make sure they get passed by the lower and upper houses.
This is no longer a given ' Merkel's centre-right coalition with the Free Democrats (FDP) lost its majority in the Bundesrat upper house after a drubbing in a regional vote last month.
Compounding her misery, German media outlets, including weekly Der Spiegel and top-selling Bild am Sonntag, have backed the opposition parties' candidate for president, meaning she may face a battle to get her choice elected to the post on June 30.
The opposition Social Democrats (SPD) and Greens put forward Joachim Gauck, a charismatic former human rights activist and pastor from eastern Germany who fought communism, to challenge Merkel's candidate, the conservative Christian Wulff.
Merkel nominated Wulff, the Lower Saxony state premier, last week as her center-right coalition's candidate for the largely ceremonial post after the shock resignation of Horst Koehler. ' Reuters
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