Chancellor Angela Merkel signalled on Wednesday that she may have dropped her opposition to cutting taxes ahead of a meeting on Monday to discuss a fresh economic stimulus package.
She gave a vague pledge to cut taxes in her New Year address due to be broadcast on TV later on Wednesday, saying: "Wherever it is justifiable with a view to the next generation, we will ease the burden on all who pay taxes and contributions."
The remark suggests that she is prepared to make concessions to the Christian Social Union, the Bavarian sister party to her conservative Christian Democrats. The CSU has been calling for tax cuts to help avert recession.
The leaders of the coalition parties will meet on Jan. 5 to discuss a second stimulus package on top of the €32 billion ($45 billion) program launched last month. No firm decisions are expected before mid-January.
Merkel made clear in her address that she would not be fulfilling all demands made on her government. "I won't decide according to who happens to be shouting loudest at the moment," she said, in an apparent response to criticism from some economists and from other European governments that Germany has so far done too little to boost its economy, the largest in Europe.
"We will take steps that safeguard and create jobs, regardless of whether they happen to be in small, medium-sized or large businesses," said Merkel. She added that her government would make sure that companies get access to the credit they need. "The state will take over here if the banks don't fulfil their duties."
The government would invest added funds in road and rail infrastructure, in modern communications and in schools and universities next year, Merkel said.
"We Germans Have Mastered Bigger Challenges"
Amid all the gloomy forecasts for 2009, she tried to find words of encouragement. "My motto is: We don't just want to overcome the impact of the global financial crisis. We want to emerge from it stronger than we went in. We can do that; we can achieve that together!"
"We Germans have mastered bigger challenges than this, and we will remember that in the year to come. We rebuilt the destroyed Germany after the war and firmly anchored it in Europe," said Merkel, pointing out that 2009 will see the 60th anniversary of the creation of the Federal Republic and the 20th anniversary of the fall of the Berlin Wall.
Merkel said she would hold regular meetings with business leaders, trade unionists and political leaders to assess the impact of the stimulus measures.
"The world lived above its means," said Merkel. She had strong criticism for the bankers and corporate executives. "Financial excess devoid of social responsibility, the loss of proportion by some bankers and executives—not all, but some—that's what led the world into this crisis," she said.
She said she would push for stronger international financial regulations and that the global economic crisis created an opportunity for more controls and greater transparency.