Some SPD left-wingers have called on Eichel to solve Berlin's financial crisis by increasing inheritance, wealth, and other levies. And the Greens want ecological taxes raised. But Eichel, backed by Schr?der, fears tax hikes would hurt the economy, which looks set to grow by just 1.5% next year compared with the 2.5% forecast the Finance Ministry based its budget on. So Eichel plans to cut spending and slash subsidies.
Subsidies to agriculture, mining, and other protected industries cost the government an estimated $28 billion, almost 1.5% of GDP, a year. But farmers and miners wield clout in Berlin and will strongly oppose cuts. Nor are the Transport and Defense Ministers likely to welcome expected budget reductions. Even the Bush Administration is weighing in. Already irked with Schr?der's opposition to war with Iraq, the U.S. is lobbying against Eichel's plans to curb military spending, analysts say. By David Fairlamb in Frankfurt EDITED BY Edited by Rose Brady