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German Industry and Unions Disagree on How to Pay for Key Spending Needs

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German Vice Chancellor (l) Sigmar Gabriel, Chairman of the Confederation of German Trade Unions Reiner Hoffmann, Chancellor Angela Merkel and Ulrich Grillo, president of the Federation of German Industries met outside Berlin this week at the government guest house in Meseberg.
  • Why it matters

    Why it matters

    German innovative strength is at risk without increased spending to improve infrastructure and bolster high-tech exports.

  • Facts

    Facts

    • The German federal government took in a surplus of more than €4 billion, or about $5.2 billion, during the first six months of 2014.
    • An economic research institute says billions of euros in new infrastructure spending is needed in Germany.
    • The German Confederation of Trade Unions wants to reinstate the net worth tax and significantly increase the inheritance tax.
  • Audio

    Audio

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The German government wants to strengthen the country’s economy through high-tech exports and more investment in transportation, energy and telecommunications. But at the 5th Dialogue Between Social Partners this week, representatives of employers and unions couldn’t agree on where the money would come from.

Germany’s innovative power must be preserved, Chancellor Angela Merkel told the gathering in Meseberg, about 70 kilometers north of Berlin. She talked about a new high-tech strategy that her cabinet was expected to ratify on Wednesday. According to officials at the talks, the government is concentrating on areas such as the digital economy and society, sustainable economies and innovative working environments.

There was agreement between the government and the social partners that investments must be increased if Germany is to retain its innovative vitality. “The net investment quota in private companies is not high enough,” said Finance Minister Sigmar Gabriel. “The same applies to investment by the government.”

Eric Schweitzer, president of the Association of German Chambers of Commerce and Industry, said the focus of government should be on investing in the future.  “But more leeway also needs to be given to companies for investments and innovations,” said Mr. Schweitzer. He argued for a return to the declining balance method of depreciation for investments and better conditions for risk capital. The government especially should not make changes in inheritance tax laws that could hurt companies, he said.

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