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German Politicians Claim Sales Tax Cut Unnecessary and Poor Solution
Monday, 01 December 2008 14:59:15 GMT  |  Roman Kadinsky, DailyFX Research
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Germany's Minister of Finance, Peer Steinbrueck, echoed comments made earlier today by Chancellor Merkel that Germany will not pursue the same course of action as other nations have done in dealing with recession. Following the U.K.'s decision last Monday to cut their sales tax from 17.5% to 15%, many economists expected that Germany would follow suit and lower their VAT as well. Earlier today however, Merkel made it very clear that Germany "must have the courage to swim against the tide" and while keeping all options on the table, the nation does not plan to "undertake a structural overhaul of the tax system." Following the Chancellor's statement, Steinbrueck expressed doubt over whether a VAT cut would actually stimulate spending. The recent comments express optimism that Germany does not need to go to through the multitude of steps that Britain is taking. The downside risk however is that, should the economy weaken further, not undertaking these steps could be a grave mistake.

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