BERLIN (Reuters) – Leading economists and political rivals on Monday tore into election promises from Germany’s conservatives to lower taxes for companies and the rich while aiming to return to balanced budgets as soon as possible.
“The economic programme of the CDU/CSU cannot be financed as it promises tax relief for top earners and companies of 50 billion euros per year, but categorically rules out higher taxes,” said Marcel Fratzscher, head of the DIW institute.
The programme, with which the conservatives want to cement their poll lead ahead of September’s federal election, is based on the assumption that an economic boom will flush more tax revenues into state coffers, he said.
But this contradicts with a reality in which an ageing society and shrinking workforce will lead to lower tax revenues and higher social expenditure, Fratzscher warned.
“The logical consequence will be a further decline in public investment in infrastructure, education and climate protection,” he said.
Gabriel Felbermayr, head of the IfW institute, said the programme agreed by the conservative alliance – or “Union” – raised risks for the public finances in the coming years.
“Overall, it is very unclear how the Union intends to finance its projects,” he said.
Finance Minister Olaf Scholz, the Social Democrats’ candidate for chancellor, said the plan to cut taxes in times of tight budgets was an “absurd idea”, adding the government already had taken on more than 400 billion euros of new debt during the coronavirus crisis to support struggling companies.
Sven-Christian Kindler, budget spokesperson from the opposition Greens, a likely coalition partner after the election, accused the conservatives of neglecting investment and clinging to the “black zero” goal of balanced budgets for ideological reasons.
Otto Fricke, budget expert from the opposition Free Democrats (FDP), another possible coalition partner, called the election promises irresponsible and contradictory.
“The CDU/CSU is trying it again with the promise that there seems to be more money for everyone – from nobody,” Fricke said.
Jens Suedekum, an economist at the Heinrich-Heine-University in Duesseldorf, said there was much to suggest that the CDU/CSU would show fiscal flexibility after the election as already hinted by CDU leader Armin Laschet with a vague proposal for an off-budget, semi-public investment vehicle.
“Only in this way, the many expenditure requirements and the adherence to the ‘black zero’ in the core budget at least on paper can be brought together,” Suedekum said.
(Reporting by Michael Nienaber and Rene Wagner; Editing by Giles Elgood)
