No Tax Hikes, Vows Germany's Chancellor Friedrich Merz
German Chancellor Friedrich Merz has said his coalition would not increase taxes, despite a growing budget deficit and calls from his governing partner to raise levies.
Finance Minister Lars Klingbeil of the Social Democrats (SPD) has floated tax increases to plug a 30 billion euro ($35 billion) hole in 2027 spending plans.
But Merz's centre-right Christian Democrats (CDU) have rebuffed the suggestion.
"We have a coalition agreement, and we have agreed in this coalition agreement that taxes will not be raised," Merz said in an interview with public broadcaster ZDF on Aug. 31.
"And this coalition agreement stands,” he added.
Merz dismissed concerns of a "clash" in the coalition and said the fact the SPD had a different view on the issue was "acceptable."
Germany's economy, in decline since 2023, shrank more than expected in the second quarter as U.S. tariffs battered exports, official data showed last week.
Merz ally Markus Soeder, CSU premier of Bavaria, recently advocated for tax cuts and argued they would help Germany's competitiveness.
But Merz, under pressure to turn Europe's top economy around, told ZDF that Germany needed to "work more and longer".
He cited an excessive number of days of sick leave, stagnant productivity and high labour costs as factors weighing on the nation's competitiveness.
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