Germany Announces EUR 80 B Austerity Plan

German Chancellor Angela Merkel (R) and Foreign Minister Guido Westerwelle inform the press about budget cuts in Berlin. Photo by BGNES

The German three-party coalition cabinet has backed Chancellor, Angela Merkel, for a fiscal austerity program and cuts in the record amount of EUR 80 B by 2014.

The plan provides for cutting the deficit by about 3% of the Gross Domestic Product (GDP). The total deficit in 2009 was 3.1%, but is projected to grow to more than 5% this year.

The measures to be undertaken by Berlin include slashing EUR 30 B from the welfare budget and the subsidies to parents who stay at home; cutting up to 15 000 government jobs in the next four years, and higher taxes on nuclear power, in the amount of EUR 10 B.

The cabinet also wants to levy an environmental charge on passengers flying from German airports.

In the longer term, there are also plans to reform the military - potentially cutting 40 000 servicemen jobs.

Berlin further agreed to make one high-profile cut close to home by postponing plans to rebuild the baroque Stadtschloss palace in the heart of the capital city.

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