German finance minister proposes rival economy plan, document shows

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BERLIN (Reuters) – Germany’s finance minister is pushing for tax cuts and fiscal discipline in a position paper seen by Reuters on Friday that challenges an investment plan by the economy minister, laying bare a deep divide in the governing coalition.

Christian Lindner of the Free Democrats (FDP), the free-market kingmaker in Chancellor Olaf Scholz’s three-way coalition, calls for “an economic turnaround with a partly fundamental revision of key political decisions” in an 18-page policy paper from the finance ministry.

Public rowing over economic and industrial policy between the FDP, Greens and Scholz’s Social Democrats has fuelled speculation of the coalition’s potential collapse, a year before elections are due.

The finance ministry document comes over a week after Economy Minister Robert Habeck, seen as the Greens’ likely future candidate for chancellor, put forward his own multi-billion-euro investment plan to remedy weak growth in Europe’s largest economy.

He proposed the creation of a fund to stimulate massive investment and get around Germany’s strict fiscal spending rules, fiercely guarded by the FDP.

By contrast, Lindner advocates tax cuts to spur the economy, proposing in the paper, for example, an immediate end to the solidarity surcharge, paid on top of income and corporation tax and introduced following reunification to boost the country’s poorer eastern states.

He also proposes an immediate halt on all new regulation and criticises over-ambitious climate standards.

Lindner also proposes scrapping 10 billion euros ($10.86 billion) in subsidies from the budget completely after the semiconductor project they were intended for was put on ice by Intel.

Habeck had previously indicated that the funds could be reallocated.

($1 = 0.9212 euros)