–Adds Final Results, Impact On Euro Aid Bill To Story Sent Sunday

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.

According to the preliminary final results released early Monday
morning, the conservative-liberal CDU-FDP coalition, which currently
governs in North Rhine-Westphalia, won only 41.3% of the votes, while
the other parties — the center-left SPD, the ecologist Greens and the
neo-communist Left party — scored 52.2%.

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 out of 69 total seats.

As a result, Merkel’s federal government from now on will have to
rely on the opposition if it wants to get bills through the Bundesrat.
It is expected that the government coalition will not be able to win
majorities anymore for the large tax cuts it has promised.

In its coalition contract, the Merkel government pledged tax cuts
of E24 billion in the current legislature, which runs until 2013. Up to
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.

The change of majorities in the Bundesrat, however, will have no
serious impact on the adoption of the aid measures to stabilise the euro
agreed by EU finance ministers this morning.

The German share of the EU aid program will come out of the federal
budget. The Bundesrat can only delay federal budget bills for some time
but cannot indefinitely block them.

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

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