By Maria Martinez
BERLIN, March 25 (Reuters) – Germany’s Finance Minister Lars Klingbeil on Wednesday proposed measures including income tax reform and capping the excess profit of energy companies to boost the sluggish economy, saying the country needed a new growth model.
“Whether Germany remains a strong country is up to us alone. We alone will decide that,” Klingbeil said, adding Europe’s biggest economy needed innovation, higher productivity, and technological leadership.
“We need technological leadership in key areas, competitive conditions for investment, a modern industrial base, secure supply chains, and functioning capital markets,” he said.
Germany’s economy has struggled to grow since the pandemic, as rising competition from China and higher energy prices have strained its export-driven economic model.
The finance minister, who is working on the 2027 budget, said the government’s reforms will include fiscal consolidation, with a detailed analysis of revenues and expenditure.
“We cannot respond to every crisis and every problem with still more money,” Klingbeil said.
INCREASING WORKING HOURS AND PRODUCTIVITY
Germany’s labour market is suffering due to high levels of part-time work, incentives for early retirement and tax transfer systems that in some cases discourage additional work, he said.
“I want us to create a system in which willingness to perform pays off,” Klingbeil said.
Half of the women in Germany work part-time. German income splitting lowers taxes for couples with unequal earnings, but it also raises the effective tax on the lower earner’s additional work, often the wife, discouraging women from taking on more hours.
Klingbeil proposed abolishing income splitting for married couples in its current form for future marriages.
(Reporting by Maria MartinezEditing by Madeline Chambers and Sharon Singleton)