Germany to unveil cuts to welfare, jobs

[June 07, 2010]  BERLIN (AP) -- Germany was close to finalizing Monday a major package of government savings, which would likely cut social welfare benefits, slash public sector jobs, and raise taxes to tackle the budget deficit.

With the debt crisis undermining the euro, Chancellor Angela Merkel's government is determined to tackle Germany's deficit -- which while among the smallest in Europe is still above the official EU limit.

Several other countries -- notably Greece, Spain and Portugal -- have already embarked on much tougher austerity drives.

Merkel brought together her Cabinet for a two-day meeting at the chancellery that started Sunday to discuss the package. She said as she went into the meeting that Germany can no longer live beyond its means, insisting "we can only spend what we take in."

"Our citizens' greatest concern is that public deficits could grow to become immense," Finance Minister Wolfgang Schaeuble said.

Measures reportedly under consideration include cuts to public-service jobs, a reduction of handouts to new parents and new taxes on power providers.

Germany had a budget deficit of 3.1 percent of gross domestic product last year. It is expected to exceed 5 percent this year, still well above the European Union's 3 percent threshold.

Officials say Germany needs to save euro10 billion ($12 billion) a year through 2016 to meet a constitutional balanced budget requirement.

Opposition politicians and union officials criticized the prospect of cutbacks on social spending.

The head of Germany's labor union federation, Michael Sommer, argued that Germany should increase taxes for the rich and introduce a financial market transaction tax to help narrow its budget gap.

"In a situation like this ... we must do everything to stabilize the state's finances -- and that means those who have more really being drawn on to finance this state," Sommer said on Suedwestrundfunk radio.

[Associated Press; By GEIR MOULSON]

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