Tax wiggle room

German Vice Chancellor Guido Westerwelle said he was committed to using any increase in revenue from Germany's bumper economic growth to ease the tax burden on Germany's middle classes.

"This government is unwavering in its commitment to relieve the burden on the middle class in the interests of growth, job creation and fairness," he told German Sunday newspaper Bild am Sonntag. "Where there is room for maneuver, it must be used."

Germany's strong economic growth of 2.2 percent in the second quarter this year is expected to spur a sharp increase in tax revenues. Analysts at the Kiel Institute for the World Economy estimate that the government could take in 11 billion euros ($14 billion) more than expected this year.

Westerwelle said that the ruling coalition, in which his party the pro-business Free Democrats (FDP) are the junior partner, should take a share of the credit for Germany's best quarterly growth results since reunification in 1992.

Figures released on Friday showed that Germany's economy grew at its fastest rate for more than 20 years from April to June, outpacing eurozone neighbors and Britain.

"Our government is good for the economy, the labor market and prosperity. This has quite obviously made an important contribution to the current economic and employment miracle in Germany," Westerwelle said.

In the interview, Westerwelle - who is also foreign minister - also announced that plans were being drawn up to simplify the tax system.

Need to slash deficit

The need to address national budget deficits in the light of the Greek debt crisis has meant that German Chancellor Angela Merkel's coalition is unable to deliver on pre-election promises of tax cuts, choosing instead to slash public spending.

The government hopes to save 80 billion euros by 2014 and in June unveiled the largest package of austerity measures in the country's history, with deep cuts in social welfare programs and the public sector.

Westerwelle's comments on tax cuts are not likely to go down well in Germany with some politicians already calling to ease the impact of budget cuts on the poorer members of society.

The budget expert from the opposition Social Democratic Party (SPD), Carsten Schneider has called for the government to take a "more social approach" to its policies as a result of the growth boost.

Richard Connor (dpa/AFP/Reuters)
Editor: Sonia Phalnikar