German Chancellor Gerhard Schroeder vowed today there would be no tax increases next year to help finance government plans to cut income taxes and said he saw growing signs of recovery Europe's biggest economy.
Mr Schroeder said in an interview with Der Spiegelmagazine that the sweeping income tax cuts would be financed through a combination of higher economic growth, reduced government subsidies, privatising government holdings and new borrowing.
"Taking out of the right pocket to put more in the left pocket isn't going to happen," Mr Schroeder said, dismissing fears other taxes would be raised to compensate for the lower income taxes. "And even the suggestion to raise the value-added tax would destroy the urgently needed (economic stimulation)."
Mr Schroeder's cabinet agreed last week to accelerate by a year tax cuts worth some 15.5 billion euros originally planned for 2005 to try to kick start the economy. Without any counter-financing, new borrowing next year would be 30.8 billion euros, seven billion euros more than originally planned.
Even though gross domestic product has grown by less than one percent in the last two years - 0.2 per cent in 2002 and 0.6 percent in 2001 - and is expected to stagnate this year, Mr Schroeder said he believed the upturn was gaining pace.
