German Chancellor Angela Merkel’s coalition government reached an agreement to cut income taxes by 6 billion euros ($8.3 billion), resolving a dispute between coalition partners over tax relief versus budget consolidation.
The chancellor announced the agreement late yesterday in Berlin, telling reporters that the cuts will help boost economic growth after they begin to take effect in 2013. The reduction targets lower-income earners.
Merkel’s Christian Democratic-led bloc has faced demands to cut taxes from its Free Democrat Party partner in the two years since the coalition has been in power. Officials including Finance Minister Wolfgang Schaeuble have said the government should focus on reining in the deficit.
Economy Minister Philipp Roesler, who leads the FDP, said the party will now focus on issues other than taxes.
The agreement was part of a broader package that included an increase in contributions for nursing care, more money for child care, a 1 billion-euro increase in transport infrastructure investment and an incentive for foreign workers.
