BERLIN (MNI) – German Chancellor Angela Merkel’s CDU/CSU-FDP
federal government coalition was defeated in Sunday’s state elections in
North Rhine-Westphalia, in the process losing its majority in the upper
house of parliament, the Bundesrat representing the 16 states.

Projections by German ARD public television — some two hours after
the polling booths closed — credited the conservative-liberal CDU-FDP
coalition currently governing in North Rhine-Westphalia with only 41.4%
of the vote, while the share of the vote for the other parties — the
center-left SPD, the ecologist Greens and the neo-communist Left party
— was seen at 52.0%.

The defeat of the CDU-FDP government in North Rhine-Westphalia
means that Merkel’s camp loses six seats in the Bundesrat and will now
control only 31 of the 69 total seats.

Merkel’s federal government will now have to rely on the opposition
if it wants to get bills through the Bundesrat. It is expected that the
government coalition won’t be able to win Bundesrat approval for further
significant tax cuts.

In its coalition contract between the CDU/CSU and FDP, the Merkel
government has promised tax cuts of E24 billion in the current
legislature, which runs until 2013. Until now, only E4.5 billion of
those cuts have been implemented.

All the opposition parties have said they reject further tax cuts,
since tax revenue is already on the decline due to the deep recession
the country has gone through.

In its latest tax revenue estimate released last week, the
government revised down its tax revenue forecasts for the period from
2010 through 2013 by some E39 billion.

Even Finance Minister Wolfgang Schaeuble suggested recently that
public budgets could not support large-scale tax cuts. Schaeuble has
pledged to cut the federal structural deficit by E10 billion per year
from 2011 through 2016, as required under the tough national debt
limitation rules enshrined in the constitution.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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