Germany Merkel Against Tax Cuts,Higher Debt For Econ Stimulus

BERLIN -(Dow Jones)- It would be wrong to opt for a fiscal stimulus package that's funded with tax cuts or higher debt, Chancellor Angela Merkel said Wednesday.

She also said the German cabinet will next week adopt specific measures to boost the economy.

"We know that we have to build a bridge for the companies in our country, but I believe that far-reaching financing rules or tax and debt-funded economic growth plans would be the wrong way to build such a bridge because a short-lived flash in the pan won't help the economy," Merkel said. The plan to be approved next week will be "very specific, courageous and most of all sustainable."

Speaking at the BGA Association of German Exporters and Wholesalers Business Day, Merkel said the current financial crisis goes hand in hand with a cooling down of the world economy and that the recent 50-basis-point interest rate cut by the European Central Bank has been "helpful" in dealing with the current situation.

Several proposals for specific growth stimulus packages have been made so far. They include plans to cut car taxes and extending the period of paying out short-time working benefits 18 months from the present 12 months, as well as tax depreciation rules for goods and awarding more money for infrastructure programs.

-By Andrea Thomas, Dow Jones Newswires; +49 (0)30-2888 410; andrea.thomas@dowjones.com

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(END) Dow Jones Newswires

October 29, 2008 10:22 ET (14:22 GMT)


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