(snip)"Merkel Wins Majority for Tax-Cut Coalition in German Election
Sept. 27 (Bloomberg) -- German Chancellor Angela Merkel said she’ll press ahead with tax cuts and labor-market deregulation after winning re-election with enough support to govern with the pro-business Free Democrats.
With Germany struggling to recover from the deepest economic slump since World War II, voters spurned plans by Merkel’s Social Democratic challenger to raise taxes on top earners. Frank-Walter Steinmeier’s SPD had to its worst postwar result in what he called a “bitter day” after sharing power with Merkel for four years and governing for the previous seven.
“There’s a clear sentiment in favor of economic changes, especially on income taxes,” Tilman Mayer, head of the Bonn- based Institute for Political Science, said in an interview. “Voters have turned their back on grand coalition-style compromise politics.”
Merkel, 55, said on ARD television that talks on forming a coalition with the Free Democrats will proceed quickly, and her focus will be on creating jobs in Europe’s biggest economy. She dismissed the FDP’s call for a complete overhaul of the tax system, saying she wanted to be seen as the “chancellor of all Germans” and won’t let her new junior partner stand in the way.
During the campaign, she pledged to pursue deregulation, extend the life of nuclear-power plants and introduce across- the-board tax cuts of 15 billion euros ($22 billion).
Reform ‘Mandate’
The result of yesterday’s election will “modestly enhance the long-run growth potential of the country,” Holger Schmieding, chief European economist at Bank of America-Merrill Lynch in London, said in a phone interview. “The government has a mandate, not for dramatic change, not for a Thatcherite revolution, but it is a mandate for some supply-side reforms.”
The euro may advance and bunds fall on the election result. The currency has climbed 5 percent against the dollar this year on speculation the euro region may be emerging from recession. Uto Baader, chief executive officer of Baader Bank AG, based in Unterschleissheim, said before the election that “the market will jump” with a Merkel-FDP government.
Merkel’s Christian Democrats and their Bavarian sister party, the Christian Social Union, won 33.8 percent in the elections to the 598-seat lower house of parliament and the Free Democrats 14.6 percent, ARD projections showed as of 10:04 p.m. The Social Democrats had 23.1 percent, a drop of 11 percentage points from 2005, the biggest decline for any party in postwar history.(snip)
(snip)Merkel pledged to cut the lowest tax rate to 12 percent from 14 percent and raise the threshold for the top rate to 60,000 euros from 52,000 euros. The Free Democrats want to replace the progressive income-tax system and its exemptions with just three brackets: 10 percent, 25 percent and 35 percent.
“Merkel can’t expect her coalition partner to slot into its historic role as the junior mascot,” Hans-Juergen Hoffmann, managing director of Berlin-based polling company Psephos, said in an interview. “The FDP made brash promises to voters to push economic growth, above all to cut taxes, and knows it will be measured by its resolve to see them through. Merkel could be in for a bumpy ride.” (snip)
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Lowering income taxes ? Deregulating labor (i.e. unions) ? Expanding / extending nuclear power ? This is certainly a major change in economic policy support by the German voters !



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