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Germany agrees to tax breaks

November 6, 2011

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BERLIN—Chancellor Angela Merkel said Sunday her government has agreed on tax breaks for Germans worth euro6 billion ($8.3 billion) over the course of two years, as "thanks" for the burden they have had to carry in Europe's ongoing debt crisis.

Merkel told reporters that an agreement was reached late Sunday among her Christian Democrats and their coalition partners. She said the tax cuts would come in two steps, with the first starting in January 2013 worth euro2 billion aimed at easing the burden on lower and middle income Germans. The second step is scheduled for January 2014 and will be worth euro4 billion.

The legislation must still be approved by parliament.

Merkel said in announcing the decision that her government would continue to reduce the nation's deficit, but at the same time felt compelled to give something back to citizens.

"We want to thank citizens for the many burdens they have borne throughout the international financial crisis," the news agency dapd quoted Mekel as saying.

Tax cuts were an election promise of Merkel's government. The first step of the announced cuts will take place in the same year Germany is scheduled to hold general elections.

Germany expects to take in euro16.2 billion ($22.3 billion) more in taxes this year than previously forecast, the finance ministry announced Friday. That brings the new total projected German tax income for 2011 to euro571.2 billion.