Categories: Economic News

Germany must ask high earners to help with energy relief – economic advice

BERLIN, Nov 9 (Reuters) – Germany must tighten its energy relief measures in the face of rising inflation, ensuring only households and businesses that need help are on the receiving end as they ask the high incomes to bear more of the burden, according to a group of experts. said economic advisers.

The current measures “relieve too much,” Monika Schnitzer, one of the five advisers, said on Wednesday, noting that high earners also benefited from a cut in the fuel tax and a brake on expected gas price.

This increases public debt more than necessary, as well as stoking inflation, he added at a press conference.

The panel suggested in its annual report to raise the top rate of income tax or impose an energy solidarity tax on high earners to help the government finance relief measures for those who need them.

“As long as relief measures are effective, the burden must be placed on those who can afford it,” Schnitzer said.

German Finance Minister Christian Lindner said the government would carefully examine the panel’s report, but rejected calls to raise taxes.

“This is not the time to cause more economic uncertainty,” he told reporters.

Advisers were also critical of Lindner’s plans to reduce so-called “cold progression”, under which income tax brackets do not adjust for inflation, in light of the current crisis energetic

Although compensation for the “cold progression” was necessary from the point of view of the tax system, said the panel’s Achim Truger, it should be postponed as the current aim is to provide targeted relief to groups of low and middle income and avoid an excess of the public budget.

The panel expects inflation to reach 8% this year, in line with the government’s latest forecasts. For next year, they forecast 7.4%, compared to the government’s 7.0%.

He cited a robust labor market and a boost from relief measures, particularly a curb on gas prices, in his slightly less pessimistic outlook for the German economy, forecasting growth of 1.7% this year and a drop of 0.2% next year.

The government’s latest forecast calls for growth of 1.4% this year and a contraction of 0.4% next year.

High inflation slows economic growth and can negatively affect companies’ financing and investment decisions, the panel noted, adding that it was crucial for the European Central Bank to continue to act decisively in rate hike decisions.

“The trick is to raise interest rates with a sense of proportion to fight inflation without causing the economy to fall too far,” said Ulrike Malmendier, one of the panel members.

In addition, it is essential to expand and diversify energy supply while encouraging consumers to reduce use.

Reporting by Miranda Murray; Editing by Madeline Chambers and Emelia Sithole-Matarise

Our standards: the Thomson Reuters Trust Principles.


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