Budget talks

Speaking during the annual debate on the budget, German Chancellor Angela Merkel defended her center-right coalition's handling of the economy, saying that after 13 months in power the government was on the right course.

"The economy is growing again and the number of unemployed has dropped to below three million," said Merkel.

Merkel also reiterated that budget consolidation was her government's primary task. She argued that spending cuts came first but government plans for tax cuts had not been forgotten either. However she declined to provide a specific timeline for lowering taxes.

The draft for the 2011 budget includes new borrowing of 48.4 billion euros ($64.6 billion). In the current 2010 budget year new borrowing of 50 billion euro is expected.

Saving for the future

Countering opposition criticism that she was "skimping on the future", Merkel said that, on the contrary, she was "saving money to invest in the future."

In an attack on the opposition Green party, which is currently riding high in the opinion polls ahead of a number of state elections in 2011, Merkel sharply criticized what she called its "permanent blockade" politics.

The Green's parliamentary leader, Renate Kuenast, responded by calling the coalition's social and ecological policies a "declaration of bankruptcy."

Social Democrat parliamentary leader, Frank-Walter Steinmeier said the coalition ruled far beyond its capabilities and that it had "squandered" the electorate's trust.

Author: Nigel Tandy (dpa/AFP/Reuters)

Editor: Chuck Penfold