Parties Reach Coalition Agreement For Next German Government

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Germany's Christian Democrats and the Free Democrats have agreed to form a coalition government, pledging to cut taxes, reform the health-care system, and pull all remaining US nuclear weapons from the country, reports said Saturday.

The major challenge before Chancellor Merkel's new government, formed almost a month after her Christian Democrats and the FDP won a majority in a federal election, will be to stabilize the economy and cut a huge deficit.

Germany economy has been hit hard by the global economic slowdown, triggering the worst recession since the foundation of the Federal Republic in 1949.

The parties agreed for taxes to be cut by 24 billion euros, or about $36 billion, even though Germany's budget deficit is expected to soar. Tax cuts have been designed to spur economic growth, and would be coming at a time when Germany's budget deficit is rising.

Wolfgang Schaeuble, a CDU member and veteran interior minister, was named as the new finance minister after the coalition deal was struck.

The new foreign minister, Guido Westerwelle, who is the leader of the Free Democrats or the FDP, has vowed non-proliferation as his priority, including the withdrawal of the US nuclear warheads stationed in Germany since the Cold War.

Another significant point in the coalition agreement was the overhauling of the country's health care system. It was expected to include a freeze on employers' contributions, meaning individuals would carry the burden of any cost increases.

Child benefits and tax write-offs for families with children were to be increased in 2010.

The new government is expected to take office next week.

(Market News Provided by RTTNews)