Germany Finances

If everything had gone according to plan, Chancellor Helmut Kohl would already be working out of a gleaming new federal chancellery here in Germany's once and future capital. But creating new seats of government can be a lengthy process, and as things have turned out, Kohl just turned the first shovelful of earth for the new chancellery this week.

Triggering howls of protest from politicians in states that will lose the most in federal spending, German Defense Minister Rudolf Scharping announced post-Cold War military reforms Monday that will close 59 bases and reduce the size of the army by nearly 10%. The cuts are part of a military restructuring that reflects major changes in the threats to European security.

Kohl Rejects Tax Cuts: German Chancellor Helmut Kohl said cutting taxes is out of the question since the government has already squeezed all the savings it can out of its budget. "I cannot lower taxes, and will do so under no circumstances if it leads to an increase in the national debt," Kohl told German television. "And we have reached a limit as far as savings goes."

In the unlikely role of caped crusader, the embattled spirit of former Chancellor Helmut Kohl has swept into this week's Social Democratic Party convention to rescue his beleaguered successor and political rival, Gerhard Schroeder.

Chancellor Helmut Kohl, after three days of tough negotiations, reached agreement Saturday with Germany's 16 regional premiers and the opposition on a long-term plan to pay for German unification. A key element of the deal was the reintroduction of a 7.5% surcharge on income tax from 1995 onward to help cope with a widening budget deficit caused by massive transfers of resources to formerly Communist eastern Germany.

Proceeds From Berlin Wall Released: The German government agreed to release more than $1.2 million earned from selling chunks of the Berlin Wall. The money from the wall, now largely demolished, had been earmarked for a social and cultural trust in reunited Berlin, but Bonn had complained that the cash disappeared into government coffers. Pastor Martin Ziegler, the trust chairman, had campaigned since November to make the Finance Ministry release the money.

German Finance Minister Theo Waigel on Wednesday imposed a spending freeze aimed at getting the federal government's 1996 deficit back on target. The freeze, which goes into effect Friday, will mean spending cuts in some areas because "extra spending" will probably be needed to meet the cost of high jobless levels, Waigel told the Bundestag, or the lower house of Parliament. The overall size of the cuts won't be clear until the next tax estimate in mid-May, Waigel said.

Citing personal rather than political reasons, Europe's leading central banker, German Bundesbank President Karl Otto Poehl, said Thursday that he will resign later this year, four years before the end of his current term. "I have today informed the bank's central council of my wish to leave in the course of this year on personal grounds," Poehl, 61, said in a nine-point written statement issued by the Bundesbank in Frankfurt after the council's morning meeting.

Germany made the first large cutbacks in its postwar social welfare program, and the government says more reductions are planned. In a hotly contested move, the upper house of Parliament in Bonn trimmed unemployment benefits, child-support payments and job-retraining programs. The reforms, already approved by the lower house of Parliament, take effect Jan.

The German Bundesbank slashed short-term interest rates Thursday to their lowest level since December, 1988, in a move that could re-energize Europe's economy and help strengthen the rebounding U.S. dollar. In the United States, meanwhile, a weaker-than-expected report on July durable-goods orders drove short- and long-term bond yields sharply lower on hopes that the Federal Reserve Board may also still have room to reduce rates.

Emboldened by a scholarly report that German industry earned the current equivalent of nearly $100 billion on the backs of Nazi-era slave laborers, lawyers for the victims demanded Monday that the state and leading companies significantly boost their compensation offer of about $3.7 billion. On the eve of negotiations scheduled to resume today in Bonn, U.S.

If everything had gone according to plan, Chancellor Helmut Kohl would already be working out of a gleaming new federal chancellery here in Germany's once and future capital. But creating new seats of government can be a lengthy process, and as things have turned out, Kohl just turned the first shovelful of earth for the new chancellery this week.

Kohl Rejects Tax Cuts: German Chancellor Helmut Kohl said cutting taxes is out of the question since the government has already squeezed all the savings it can out of its budget. "I cannot lower taxes, and will do so under no circumstances if it leads to an increase in the national debt," Kohl told German television. "And we have reached a limit as far as savings goes."

German Finance Minister Theo Waigel on Wednesday imposed a spending freeze aimed at getting the federal government's 1996 deficit back on target. The freeze, which goes into effect Friday, will mean spending cuts in some areas because "extra spending" will probably be needed to meet the cost of high jobless levels, Waigel told the Bundestag, or the lower house of Parliament. The overall size of the cuts won't be clear until the next tax estimate in mid-May, Waigel said.

The German Bundesbank slashed short-term interest rates Thursday to their lowest level since December, 1988, in a move that could re-energize Europe's economy and help strengthen the rebounding U.S. dollar. In the United States, meanwhile, a weaker-than-expected report on July durable-goods orders drove short- and long-term bond yields sharply lower on hopes that the Federal Reserve Board may also still have room to reduce rates.

The Bundesbank trimmed its chief money market rate to 4.39% from 4.45%, moving a step closer to more substantial cuts in German interest rates. "This is a clear indication that the Bundesbank is willing to cut," said Ulrich Beckmann, an economist at DB Research, the research arm of Deutsche Bank. "It just depends whether they'll do it tomorrow or wait for two weeks."

Germany's central bank cut its discount rate slightly Thursday, raising hopes of a round of global interest rate reductions that spurred a rise in blue chip stocks on Wall Street. On the New York Stock Exchange, the Dow Jones industrial average rose 38.90 points to end at 3,465.64, within short distance of the March 10 record high close of 3,478.34.

The cream of Germany's political leadership convened for an extraordinary meeting Friday to resolve the long-festering issue of financing the staggering costs of rebuilding the former Communist east.

Germany made the first large cutbacks in its postwar social welfare program, and the government says more reductions are planned. In a hotly contested move, the upper house of Parliament in Bonn trimmed unemployment benefits, child-support payments and job-retraining programs. The reforms, already approved by the lower house of Parliament, take effect Jan.

Germany's central bank cut its discount rate slightly Thursday, raising hopes of a round of global interest rate reductions that spurred a rise in blue chip stocks on Wall Street. On the New York Stock Exchange, the Dow Jones industrial average rose 38.90 points to end at 3,465.64, within short distance of the March 10 record high close of 3,478.34.