| Posted on the off-chance that Europe still matters. |
 BERLIN - The Bundestag, the German lower house of parliament, voted on Friday in favour of the governmentÂ’s controversial plans to raise value-added tax (VAT) by three full percentage points in a move critics say will put the brakes on recovery in the eurozoneÂ’s biggest economy. In a full session of parliament on Friday, politicians of both the Social Democrat SPD and the conservative CDU/CSU parties approved the proposals by the government of Chancellor Angela Merkel to raise VAT from 16.0 percent to 19.0 percent from January 1, 2007. Part of the additional revenues will be used to finance a planned reduction in non-labour wage costs for employers.
| So you tax people more so as to cut some of the government mandated costs. I'm not sure my Intro to Econ course in college covered that ... |
And some of the revenues will be used to help plug the gaping holes in the German public purse. Berlin hopes to cut its public deficit to 22 billion euros (28 billion dollars) next year from an anticipated 38 billion euros this year, meaning the government will make a great deal of headway in bringing its deficit back within EU limits by 2007. But the VAT hike has come under fire from industry, as well as experts such as the Bundesbank and GermanyÂ’s leading economic think-tanks. They argue it could put the brakes on the fledgling economic recovery in Germany. Finance Minister Peer Steinbrueck has ackwowledged the risks, but insisted the government had no alternative for getting its public finances back in order.
| I guess actually cutting the federal budget was out of the question. |
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