New Merkel minister defends tax cuts after attacks

By Sarah Marsh
BERLIN (Reuters) – Germany’s new finance minister cautiously defended the tax cut plans of Chancellor Angela Merkel’s incoming government on Sunday, but said it was only a matter of time before steps were needed to rein in the deficit.
Merkel sealed a coalition deal with the Free Democrats (FDP) on Saturday, vowing to cut income taxes by 24 billion euros (22 billion pounds) from 2011 and to reduce levies on companies to boost growth following Germany’s worst postwar recession, winning praise from business leaders.
Merkel failed however to spell out how the new government would pay for the cuts and the plans were sharply criticised in the German media and by left-wing leaders over the weekend.
Influential weekly Der Spiegel putting a warning sign on its cover alongside the headline “Take care, centre-right: The adventurous false start of the new coalition,” while public broadcaster ARD asked “Who will pay for this?.”
Wolfgang Schaeuble, the veteran conservative Merkel tapped to tackle Germany’s budget deficit, had criticised Merkel’s election pledge to pursue large tax cuts by saying there was little room for them given Germany’s strained finances.
The budget deficit in Europe’s largest economy ballooned last year as Merkel’s outgoing “grand coalition” pushed through 81 billion euros in stimulus measures to combat the crisis.
But Schaeuble told ARD broadcaster late on Sunday the new coalition’s planned income tax cuts were “economically right” and the government would work hard to implement them by 2011 — although he warned he could not guarantee this.
“The coalition has the firm aim to make this happen,” he said. “If possible, on January 1, 2011.”
In a separate interview with daily Die Welt, Schaeuble defended the new cabinet’s “wait-and-see” approach to the budget, which he said was impossible to balance over the next four years, but signalled savings were only a matter of time.
“We will see where we will save, step for step, depending on how the economy evolves,” he said.
At an FDP conference to approve the coalition deal, FDP head and new Foreign Minister Guido Westerwelle added weight to Schaeuble’s message, saying his party was “declaring war against the waste of taxpayer money.”
NEW, OLD CABINET
Schaeuble, a 67-year-old who has held a range of top posts in conservative-led governments over the past four decades, is one of several ministers in Merkel’s new cabinet belonging to an older generation of politicians, prompting one Spiegel columnist to describe it as a political “Jurassic Park.”
He will be joined by two veterans from the FDP: Rainer Bruederle, 64, in the Economy Ministry and Sabine Leutheusser-Schnarrenberger, 58, who will be taking back the Justice Ministry which she occupied in the 1990s when the FDP was in government with the conservatives under Helmut Kohl.
Schaeuble is also one of seven conservative ministers in Merkel’s outgoing government who will remain in power.
The only new face and overnight darling of the German media is Philipp Roesler (FDP), set to become health minister. Born in Vietnam, the 36-year-old was adopted and grew up in Hamburg, and will become Germany’s first Asian-born minister.
“The fairytale of the orphan who became minister,” read the front page headline of Germany’s best-selling daily Bild.
His role will be key as the government seeks to reform the funding of the health system and to plug a 7.5 billion euro (6.9 billion pound) hole in the state health fund.
The FDP had wanted to abolish the fund, but Merkel, whose outgoing “grand coalition” set it up, refused. Under the coalition deal, it will stay in place but the financing arrangements will be reformed in about 2011.
The new government will be sworn in on Wednesday.
(Editing by Myra MacDonald)