Deficit Busting


A budget proposal includes a three-year freeze on nonsecurity discretionary funding, forces the financial industry to pay back TARP costs, and lets the 2001-03 tax cuts for households earning more than $250,000 expire. It closes loopholes for corporate and upper-income taxpayers.


To shed half of its $226 billion deficit in five years, the government is seeking backing for the deepest cuts since Margaret Thatcher was Prime Minister. The budget will focus on reducing welfare benefits and public-sector pay.


Chancellor Angela Merkel wants to reduce the budget by $98 billion by 2014. That means reducing subsidies for families, imposing a tax on air travel, slashing public-sector jobs, and restructuring military procurement. A plan for a replica of a Prussian palace in Berlin is on hold.


It's cutting public employees' wages 5 percent and plans to freeze pay in 2011. To reduce 20 percent unemployment, it will ease rigid work rules that discourage hiring. The navy may sell some warships.


The coalition government aims to shrink the deficit to 3 percent of GDP by 2013 from 14.3 percent in 2009. It has raised the sales tax, introduced a levy on income, and cut public workers' pay by 13 percent. The government may tax real estate and water usage.


Greece must lower a deficit of 12.7 percent of GDP to 8.7 percent in 2010. The main value-added tax is rising to 21 percent from 19 percent. Fuel, alcohol, and tobacco taxes are going up for a second time this year. Bonuses for civil servants will shrink.

Data: Government reports, Bloomberg News

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