Billion dollar question
October 26, 2009
While most other people are happily enjoying their retirement by the age of 67, Wolfgang Schaeuble, by contrast, is about to embark on one of the biggest challenges of his life.
The former interior minister was nominated as Germany's next finance minister by German Chancellor Angela Merkel. Schaeuble, who has been confined to a wheelchair since an assassination attempt in 1990, has described the post as an "honorable imposition."
"We are currently facing a dramatic financial and economic global crisis and no one knows what will happen in two years' time.
"This job is not subject to amusement tax, but I think that if we continue to take our responsibilities seriously, then we can successfully lead the country -- as we have done up to now -- through and out of this crisis," said Schaeuble.
Deficit-defying plans
The new government's coalition treaty and its plan for tax breaks worth 24 billion euros ($36 billion) will make his job a difficult one.
While the previous government comprised of a grand coalition between conservative Christian Democrats and Social Democrats decided to reduce taxes by 14 billion euros in 2010, the conservatives and Free Democrats have decided to provide further tax relief for families by considerably increasing parental allowances. In addition, cuts in inheritance and corporate taxes are planned.
The measures were pushed through by the pro-business Free Democratic Party (FDP). Its leader Guido Westerwelle appears confident they will pay off.
"We are convinced that fair taxes are the pre-condition for creating new jobs. They do not just contribute towards coming out of a crisis, but they are the pre-condition for being able to improve the state's income again," Westerwelle said.
A difficult balancing act
But no one really knows whether the tax relief plan will pan out as quickly as expected. The Kiel Insitute for the World Economy (ifw) has forecast that the state will raise two billion euros less in taxes than was expected in May.
The coalition's plans, the effects of rising unemployment and the need to plug financial shortfalls in the German health system will also force the finance minister to run up an additional 90 billion euros of debt. But Schaeuble has defended the new government's course.
"As soon as we have this behind us, we will have to make structural reforms and start saving. But to save now would be exactly the wrong thing," he said.
Tight timetable
But time is short. From 2016 onwards, new annual borrowing by Germany and its federal states will be limited to 0.35 percent of gross domestic product.
This so-called "debt brake" was inscribed in Germany's Basic Law by the previous coalition a few months ago. So it is imperative that the government gets the economy growing again and boosts revenues. German Chancellor Angela Merkel is well aware of this.
"It's all intended to create jobs. Hundreds of thousands of fewer jobless people will reduce spending by the Federal Labor Office and the social insurance schemes by two billion euros."
If the coalition's policies to boost growth do not work out, the finance minister will have to introduce a strict austerity program within two years' time.
Swabian credentials
This is a task that many people believe that Schaeuble would be well cut out for, as Dieter Hundt, the head of German Employers' Federation, makes clear.
"I think it was a very, very good decision to assign Mr Schaeuble the difficult office of finance minister. It needs a very experienced, competent, clear-sighted man with stamina and the necessary toughness, as well as the attitude to money prevalent in Baden-Wuerttemberg," said Hundt.
Schaeuble comes from southwestern Germany, an area where residents have a reputation for thriftiness. But the new finance minister, who has a doctorate in business law, is well qualified for the job on paper, too.
At the beginning of the 1970s he worked as a civil servant in Baden-Wuerttemberg's tax authority and later became a self-employed tax advisor and lawyer. He has been active in politics since the 1960s, and gained his first seat in parliament in 1972.
Reporter: Sabine Kinkartz (jg)
Editor: Sam Edmonds