Germany to contribute €123bn to eurozone rescue package

13 May 2010

Germany is bracing itself for a wave of austerity measures after the country's cabinet agreed for it to put €123 billion ($155 billion) towards the eurozone rescue package agreed earlier this month.

The figure has the potential to rise to a total of €150 billion if more funding is required.

To pay for the scheme, tax cuts promised by Angela Merkel's Christian Democratic Union party last year have been scrapped and decisions are now being made on how to raise additional capital for the state.

Friedrich Heinmann, a spokesman from the Center for European Economic Research, told the Guardian difficult decisions will have to be taken.

"If the government increased VAT on items that currently enjoy a reduced rate, such as hotels, theatres, books and newspapers, it would glean €8 billion; otherwise it will be forced to raise the current VAT rate [of 19.5 per cent]," he said.

The 16 members of the eurozone bloc have agreed to put up €440 billion between them, with the financial rescue package also including a €250 billion contribution from the International Monetary Fund and €60 billion from the European Commission.

By Gary Cooper

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