Shadow assets

"If I were to balance the books in a company like this, I'd get done for delaying bankruptcy." This was the verdict of the Berlin state finance minister Ulrich Nußbaum, speaking to the Sueddeutsche Zeitung newspaper, following the announcement that the new CDU/FDP coalition intended to borrow even more money to set up a special assets fund.

Under the scheme, up to 60 billion euros ($90 billion) of borrowed money would be pumped into the Federal Employment Office and the state health insurance companies over the next few years to make up for a deepening crisis in the public welfare system. Unemployment caused by the financial crisis has put huge extra burdens on Germany's public welfare system.

Other accusations were even more severe. "This is the biggest budget deception in German history," Green party budget expert Alexander Bonde said, "The CDU and FDP are getting round the debt limit with some extremely dirty tricks."

Germany's constitution was changed only recently to forbid the government from letting the national debt get out of control, but special assets are legally and economically separate from the state budget, and have often been criticized as a kind of optical illusion in the national finances.

The German government has already set up a major special assets fund to deal with the financial crisis, the Financial Market Stabilization Fund (SoFFin).

Fury in the financial world

Germany's financial community was equally indignant at the announcement. Alfred Boss, tax expert at the Kiel Institute for the World Economy remarked, "You cannot simply ignore the constitution," while Dirk Martin, chairman of the Association of Young Entrepreneurs said, "This shadow budget derails the recently introduced debt brake. Instead of piling up new debt mountains, the future coalition should be making concrete saving suggestions."

The general outrage among opposition politicians and finance experts was heightened by the recollection that the FDP, then in opposition, made a parliamentary motion in late January to hinder the creation of further special assets funds, as an initial step towards paying off the national debt.

But now that the Liberals have a chance to set the country's financial agenda, they are determined to push through their much-vaunted tax cuts at whatever cost.

Retaliation in kind

For its part, the new government had harsh words of its own for the opposition's attitude. Peter Ramsauer, head of the parliamentary group of the Christian Social Union, the CDU's Bavarian sister party, said, "If the opposition has no better ideas on important questions on the future of our country than to provide irresponsible and unimaginative criticism, then I already feel sorry for them."

FDP general secretary Dirk Niebel used more elliptical language to defend the special assets fund: "I think it would be an expression of transparency if we used this model."

Regional rebellion

But the center-right government also faces internal criticism from its state colleagues. CDU state premiers Stanislaw Tillich of Saxony and Guenther Oettinger of Baden-Wuerttemberg both warned against forcing through tax cuts, as they would be extremely detrimental to regional budgets. Some state premiers have even threatened to rebel in the Bundesrat, the upper house of Germany's parliament, should the coalition settle on its intended low-tax course.

"The FDP awoke extremely high expectations before the election, and is now having difficulty realizing them," said Oettinger. Dirk Niebel countered any internal criticism by warning of "scaredy-cat politics."

bk/AP/dpa
Editor: Michael Lawton