Merkel defends tax cuts plan

Europe News

Nov 14, 2009, 11:00 GMT

Berlin - German Chancellor Angela Merkel defended Saturday her new government's plans to cut taxes - rejecting a warning by the government's panel of economic advisers that it would achieve little. She told the Frankfurter Allgemeine Zeitung 'We knew from the start that tax cuts would not be 100-per-cent self-financing.' Merkel was referring to the argument that tax cuts stimulate economic activity, thus leading to higher state revenues. In her weekly videocast issued by her office, Merkel said her government remained committed to a cap on public borrowing as imposed by a recent amendment to the German constitution. 'We'll see to it that from the start of 2016, the federal government's borrowings are not higher than 0.35 per cent of gross domestic product,' she said, while adding that the government would be making 'significant investments' in 2010 and probably 2011. The panel of five economic advisers told the government Friday that it was illusory to think tax cuts could be paid for out of increased revenue from faster economic growth.

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