In the end everything will be in the State

Is the economy finally being reset in Germany

We are three surveys per year business. The latest highlights their great optimism for the coming months. So we are building on growth of 2 in Germany this year. And this recovery is mainly explained by the reforms carried out internally by companies. Working time has risen, often without wage compensation. It is rare to find people working 35 hours a week, outside the industry. The payment of overtime has been reduced. And salary increases were very limited. The hourly cost of labour decreased these last seven or eight years in Germany. Our companies are too highly competitive on the world market. Which they are delivered to invest and hire in Germany. Thus, we bet on a decline of unemployment of 200,000 people in the workplace of the year. This upturn largely, I insist, by the efforts made by the companies and not by political initiatives and legislative reforms. German firms are now optimistic because they think that the "grand coalition" Government will finally take the necessary measures. It has a large majority in both houses. It has free rein. It can amend the Constitution and so, reform the federal system. The project is on the table. We hope that it will be adopted. Then, we expect that the Government tackles four major projects: the taxation of business, health, pensions and the labour market.

Implying that nothing has been done under the Government of Gerhard Schröder

Gerhard Schroeder opened a door, with its Hartz labour market reforms. It has also reduced the tax burden to higher income, which was a good thing. And he also attacked the pension record, revising downward their rehabilitation.

What expect today, specifically, for businesses

Need to reduce the overall rate of corporate tax in Germany, 45 currently, one of the highest levels in Europe, 30. If it does not reduce, the companies will continue to leave the country. And the State, in the end, will be winner in terms of tax revenues, if businesses remain in Germany. It is imperative to review the regime of the estates, because most companies are family in Germany, and many patterns will pass the hand in the years to come.

What do you think the increase scheduled to January 1, 2007, three points of the main rate of VAT

This will be a poison for the German economy. This increase would represent a levy of EUR 24 billion on consumers. This will be far less to spend on them. Initially, this measure was to have as financial contribution the reduction of social contributions of the companies. In the end, everything will be in the State. According to recent forecasts of six economic institutes, tax revenues are much greater than expected this year, with the strong recovery of the activity. And the deficit will fall back below the 3 without tax increase. Why, therefore, raise the rate of VAT The Government would take a great risk. As the world economy could mark a little way after three years of strong expansion. According to some estimates, German growth returning to 1 in 2007, due to this tax screw Tower.