THE GERMAN government was last night close to agreeing major changes to welfare provision and a big cut in the size of its armed forces in a bid to get to grips with government spending in the midst of the euro zone debt crisis.
At a two-day retreat, ending today, Chancellor Angela Merkel’s cabinet also looked set to agree a bank levy from 2012, a tax on nuclear power and a review of all subsidies, according to a leaked policy document.
Ms Merkel hopes the eight-point plan will help cut this year’s €70 billion shortfall between spending and tax intake by an annual €10 billion until 2014, pushing Germany’s deficit to comfortably within EU limits.
In the confidential seven-page policy outline, the government says it will give the federal labour office new leeway in disbursing welfare funds by turning jobless benefits currently guaranteed by law into means-tested payments.
This reform – which officials said could save €2 billion in its first year – would go hand-in-hand with cuts in government allowances for new parents.
The cabinet also looks set to ask the defence minister to come up with a plan to cut the number of professional soldiers by 40,000 from 190,000, and to look at phasing out national service and its 60,000 school-leaver conscripts.
The government brief does not say how much such a step would save – more than €1 billion has been mooted recently – but it does pledge about €3.6 billion in annual savings over the medium-term from other government employees.
The government also plans to freeze Christmas bonuses for civil servants in 2011, and to cut 10,000 civil service positions by 2014 .
On the revenue side, Berlin plans to introduce a bank levy from the start of 2012. – (Copyright The Financial Times Limited 2010)
