Merkel rules out tax cuts 'in foreseeable future'

BERLIN, May 10, 2010 (AFP) - Chancellor Angela Merkel on Monday ruled out tax cuts in Europe's biggest economy, a key election pledge, "in the foreseeable future" following a "bitter defeat" in a key state poll.

"[In] my view no tax cuts will be possible in the foreseeable future," Merkel told reporters, adding that this meant "at least two years -- the budgets for 2011 and 2012." Her current term runs until 2013.

In general elections in September, Merkel ditched the centre-left coalition partners in favour of a new alliance with the pro-business Free Democrats (FDP), promising voters billions of euros (dollars) in tax cuts.

A trader sits in front of a board displaying the German share index DAX on May 10, 2010 at the stock exchange in Frankfurt/M., western Germany. AFP photo

"Looking further ahead in politics is always very difficult because many things happen differently than one can predict with forecasts today," Merkel said.

Merkel said that instead of cutting taxes, her government would focus on simplifying the taxation system.

Merkel's Christian Democrats (CDU) were also in an alliance with the FDP in the western state of North Rhine-Westphalia (NRW), Germany's most populous, but voters threw out the coalition in an election on Sunday.

Experts said that the defeat was down in large part to Merkel's decision to contribute to a massive bailout of Greece, and to squabbling in her new coalition.

"We have suffered a bitter defeat," Merkel said.

"As regards the work of the federal government I will only say this: In the first months (of the new coalition) we did not provide any momentum to the government in NRW.

"On the contrary, we were a factor holding them back, and there were many avoidable disagreements."

The election in NRW means Merkel's coalition no longer has a majority in the upper house of parliament, making the passage of legislation harder. But she ruled out any cabinet reshuffle.

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