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Merkel-govt to outline 2011 tax cuts before May vote


By Erik Kirschbaum BERLIN, March 21 (Reuters) - The German government will make concrete proposals for 2011 tax cuts before a key state election on May 9 even if full details will not be finalised until after the vote, Chancellor Angela Merkel said on Sunday. In an interview with Deutschlandfunk radio, Merkel said the details of the 2011 tax cuts would not be worked out until after the North Rhine-Westphalia election. She said much would depend on official tax estimates due just before the vote. In a separate interview, Finance Minister Wolfgang Schaeuble said he was going to demand that fellow ministers in the cabinet redouble efforts to cut spending in 2011 after new net borrowing ballooned to 80 billion euros in 2010. That is some 6 percent of gross domestic product and is twice the limit of the European Union's Stability Pact. Schaeuble said fellow ministers who are requesting more money for 2011 fail to grasp the urgent need to cut expenditures. Despite a rise in spending to fight the deepest post-war recession, Germany passed new tax relief worth 8.5 billion euros for 2010 and the government has been debating whether to scrap or water down a pledge for 24 billion euros in relief in 2011. "We can indeed make concrete plans and we'll do what's possible," Merkel said when asked about whether tax cuts will be announced before the North Rhine-Westphalia election. "Other things we can't afford. I understand the desire for clarity. But the tax estimate is an important date and I can't make final statements about (tax cuts in) 2011 before then." Schaeuble had said on Friday the government would announce proposals for tax cuts between mid-May and the end of June, but not before the May 9 election. The Sueddeutsche Zeitung had reported the government was planning a change in strategy and would present its proposals for tax reform before the NRW election -- including 5-10 billion euros worth of tax relief in place in 2011. The vote in NRW, Germany's most populous state, is crucial because it is the first electoral test for Merkel's centre-right coalition since it took office nearly five months ago. Polls suggest Merkel's conservatives and her pro-business Free Democrat (FDP) coalition partner could lose power there. Schaeuble said in a separate interview in Bild am Sonntag newspaper that the government would have to cut its structural deficit by 10 billion euros per year by 2016. Cutting the budget deficit is a top priority, he added. "The budget requests from my (cabinet) colleagues show that they have not fully seen the seriousness of the situation, to put it mildly," Schaueble said.

"I'll remind the cabinet in clear terms this week that upholding the Stability pact and constitution is a task for the whole government." (Editing by Hans Peters0 Keywords: GERMANY TAXES/ (Reuters messaging: erik.kirschbaum.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

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