Pressure on Chancellor Gerhard Schroeder over his management of Germany’s misfiring economy grew today, when MPs set up a committee to investigate whether the government hid the need for tax hikes and spending cuts ahead of September’s close-fought election.
The panel was set up at the urging of opposition conservatives, who accuse Schroeder of lying about the economic problems behind a yawning budget deficit revealed after Schroeder’s centre-left coalition secured a second term.
“We suspect that not only parliament, but also the people in this country were fooled by untruths about the economic situation,” said Peter Altmaier, who will represent conservatives on the panel.
The economy, Europe’s biggest, has been mired in near-zero growth for more than a year, forcing many firms out of business and fuelling unemployment. That in turn has eaten into tax revenues and pushed up the government’s bill for jobless benefits.
A few weeks after the election, the government had to cut its growth forecast for this year to 0.5% from 0.75%, and dropped its 2003 estimate from 2.5% to 1.5%.
It then announced a £19 billion hole in tax revenue and admitted it would breech a European Union ceiling on government deficits designed to protect the euro.
Critics charge that Schroeder and his Finance Minister Hans Eichel – both of whom are expected to be hauled before the panel – must have known this before the election. The government insists however it had only preliminary data that wasn’t ripe for publication.
Under parliamentary rules, government MPs could not block the panel, which media here have dubbed the “Lies Committee.” But Schroeder’s Social Democrats have extended the probe to cover government finances going back to reunification in 1990, including eight years under conservative former Chancellor Helmut Kohl.
The Social Democrats used a similar probe to grill Kohl over a slush fund scandal that sullied the former Christian Democrat leader in the eyes of many Germans, and Schroeder allies today accused their opponents of trying to engineer a similar spectacle ahead of two state elections in the first week of February.
Conservatives insist any officials exposed by the committee resign, but the panel has no powers to take action against those interrogated.