Chancellor Helmut Kohl never told voters to read his lips. But his decision to hike taxes steeply, reneging on a campaign pledge, could cost him politically. On Feb. 26, Kohl announced $30 billion in personal and corporate income taxes designed to narrow the $100 billion budget deficit caused by the high cost of German unification.
Business is warning that Kohl's 7.5% corporate tax surcharge will crimp investment and economic growth just as the rest of Europe slides into recession and eastern Germany's economy is virtually imploding. And labor unions are threatening higher wage demands to recoup the extra bite out of income.The tax hike comes just as Kohl is facing criticism on other fronts. His image as a bold statesman, earned by his handling of German unification, is under fire as he seems increasingly unable to make it work. He's also blamed for ducking tough ways to cut the deficit, such as slashing subsidies to industries and regions. With that, observers say, Kohl has brought the "wimp factor" to German politics.