Senior German politicians called for cuts in indirect taxes for workers and employers after the Federal Labour Office said on Friday it expected to post a large operating surplus this year thanks to the improving job market.
The Office said it expected an operating surplus of 5.0-5.5 billion euros ($6.80-7.48 billion) this year, rather than the 4.3 billion deficit assumed in the budget, sparking calls for fresh cuts to mandatory unemployment insurance contributions.
Despite cutbacks to German unemployment entitlements under the previous Social Democrat-led government, the country's non-wage labour costs are among the world's highest. Chancellor Angela Merkel's ruling coalition has already agreed to cut unemployment insurance contributions from 2008 by 0.3 percentage points to 3.9 percent of workers' gross wages - half of which are paid by employers and half by employees.
"We have room to cut non-wage labour costs further," Ronald Pofalla, the general secretary of Merkel's Christian Democratic Union (CDU) party, told Reuters, calling for a cut in the unemployment insurance contribution rate to 3.5 percent.
"The money belongs to those paying the contributions," Pofalla added of the Office's projected surplus. Klaus Brandner, parliamentary spokesman for labour market affairs for the CDU's ruling coalition partner the Social Democrats (SPD), also called for a reduction in the unemployment insurance contribution rate to 3.5 percent.
With a contribution rate of 3.9 percent, the Labour Office's reserves could still rise to 26 billion euros by the end of 2011, sources at the Office told Reuters. Dieter Hundt, head of the Confederation of German Employers' Associations (BDA), called on the government to cut unemployment insurance contributions to 3.2 percent from next year.
An economic recovery has driven down joblessness in Germany. Unemployment fell for the 15th straight month in June, taking the jobless rate to its lowest level in more than 12 years as Europe's largest economy continued to generate new jobs. Lower joblessness means the Labour Office has to pay out less money in unemployment benefit. Cuts to indirect taxes are likely to lend support to private consumption.
A spokesman for SPD Labour Minister Franz Muentefering, who is also vice chancellor, did not rule out a cut in unemployment insurance contributions below the planned 3.9 percent rate.
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