BERLIN (Reuters) - Germany’s new tax estimates show the next federal government will have around 30 billion euros available for tax cuts and additional spending over the next four years, Finance Minister Peter Altmaier said on Thursday.
The tax experts’ estimates show Germany’s strong economic growth boosting the tax take over the life of the new parliament, but Altmaier cautioned that Chancellor Angela Merkel would not be able to satisfy all the competing demands for funds from her potential coalition partners.
Merkel’s conservatives are trying to forge a tricky three-way coalition with the left-leaning Greens and the pro-business Free Democrats (FDP).
In a sign of progress after weeks of difficult exploratory talks, the Greens offered concessions on Tuesday by no longer insisting on fixed dates to ban cars with combustion engines and to shut down coal-fired power stations.
The FDP also gave ground, saying it would accept more modest income tax cuts than an election campaign pledge of up to 40 billion euros in relief. Instead, it wants to scrap the “solidarity tax” introduced after German reunification in 1990 to support poorer eastern states.
But Altmaier stressed the need for fiscal responsibility, despite the upwardly revised tax estimates that show revenues for the federal government alone rising to 348.4 billion euros in 2021 from 308.3 billion euros this year.
“The conditions are good, they have even improved a bit. But the money doesn’t grow on trees. The additional fiscal room is limited,” said Altmaier, who took over as finance minister last month from veteran Wolfgang Schaeuble, who has become president of the Bundestag lower house of parliament.
The parties involved in coalition talks have agreed to stick to Schaeuble’s goal of a balanced budget, meaning no new debt. Since 2016, the federal government is barred from taking on new net debt exceeding 0.35 percent of overall national output.
Altmaier, who is also Merkel’s chief of staff, said any reform of the “solidarity tax” - as demanded by the FDP - should now be discussed in detail during coalition talks.
An abolition of the tax starting from 2018 looks hard to finance as it would cost the federal government nearly 80 billion euros over the next four years.
Still, the FDP welcomed Thursday’s tax estimates.
“This means that the tax relief we demand is possible,” senior FDP member Volker Wissing said.
But the Greens defended the “solidarity tax”.
“What Germany now needs is a big social-ecological investment push - and not tax cuts for the rich,” Greens politician Sven-Christian Kindler said. “The abolition of the solidarity tax would be very unfair.”
Merkel wants to have an agreement in principle by Nov. 16 on moving ahead to formal coalition negotiations to form a black-yellow-green government - also dubbed Jamaica coalition because the parties’ colors match those of the country’s flag.
With a week to go, the exploratory coalition talks are not only complicated by the differences between the parties, but also by splits within the political parties themselves – especially within the conservatives and Greens.
Additional reporting by Joseph Nasr and Gernot Heller; Editing by Madeline Chambers and Gareth Jones