AP News

Germany increases social spending before election


BERLIN (AP) — Germany's ruling center-right coalition has decided to increase childcare benefits, spend more money on transportation projects and end an unpopular medical charge less than a year before a general election, officials said Monday.

The measures — costing more than €3 billion ($3.9 billion) per year — come at a time when German Chancellor Angela Merkel and her Finance Minister Wolfgang Schaeuble are urging other European nations to rein in spending and cut back public debt.

The opposition Social Democrats decried the new measures as expensive presents to voters before next year's poll in which Merkel will stand for a third term. "Mrs. Merkel and Mr. Schaeuble preach the Europeans to drink water, but at home they are having wine," center-left party leader Sigmar Gabriel said.

But Economy Minister Philipp Roesler, who is also the vice chancellor, defended the decisions, saying the parties have also pledged to achieve an almost balanced budget as early as 2014. This sets a "signal of stability and solidity" amid Europe's three-year-old debt crisis, he added.

Germany, Europe's biggest economy, overcame the slump of the 2008-2009 financial crisis with two years of strong growth. The country has so far also weathered Europe's sovereign debt crisis that has hard-hit several of the bloc's southern nations such as Greece, Portugal or Spain.

While growth in Germany is expected to fall to around 1 percent this and next year, the government has reported record tax revenues, enabling the country to reduce new borrowing without pushing through any major budget cuts.

Coalition leaders agreed to increase spending on transportation infrastructure by €750 million ($958 million) next year. They also scrapped an unpopular €10 ($13) charge that most patients must pay in addition to their health insurance when visiting a doctor — a cut worth about €2 billion ($2.56 billion).

Furthermore, the coalition agreed to press ahead with a controversial new childcare benefit that will go to parents who stay at home with their young children instead of work. According to earlier finance ministry estimates, it will cost about €400 million next year, then about €1 billion ($1.28 billion) annually starting 2014.

Among other decisions, the coalition parties also agreed to do more to help impoverished retirees, though details on the measure's estimated costs were not immediately clear Monday.

The coalition of Merkel's Christian Democrats, their Bavarian sister party and the pro-business Free Democrats announced the changes early Monday after hours of late-night talks.

Under the child care benefit set to start next August, families will be entitled to monthly aid of €100 ($128) when one parent — in most cases in Germany still the mother — keeps their 2-year-old child at home rather than sending him or her to a day care center.

A year later, parents will be paid €150 ($191) for each of their 2- and 3-year-old children. Other welfare programs already exist for children under age 2.

The program pushed for by Merkel's socially conservative Bavarian sister party has proven to be very controversial within the coalition. Several lawmakers have threatened to veto the legislation.

German media widely call the program the "Herdpraemie," loosely translated as "kitchen bonus."

The opposition condemns the proposal as an attempt to promote conservative family values that will hurt children's early childhood education, saying the money should better be used to create more day care center places.

German business leaders have also spoken out against the program.

"It sets the wrong incentives for parents to pull out from their jobs," the powerful BDA lobby group of Germany's employers said in a statement.

___

Frank Jordans in Berlin contributed reporting.

___

Juergen Baetz can be reached on Twitter at http://www.twitter.com/jbaetz


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus