BERLIN, Nov 20 - German Chancellor Gerhard Schroeder told he is confident a major tax cut will win parliamentary approval by the end of the year and spark growth as soon as it takes effect in January. In a written response to questions before his departure to meet U.S. business leaders in New York on Thursday, Schroeder also said U.S.-German business relations were excellent despite a dispute over Iraq that soured political ties. Schroeder opposed the war in Iraq but agreed at talks with U.S. President George W. Bush two months ago that they should put their differences behind them. He told the proposed tax cut would help free up 22 billion euros for consumers and corporations from January. "All the indications are showing the economic recovery in Germany has begun and we want to do all we can to strengthen that upturn," Schroeder said. The eagerly awaited tax cut, one of the biggest in Germany's history, would give Europe's largest economy an important stimulus next year and boost growth to levels not seen since gross domestic product expanded 2.9 percent in 2000, he said. "We're expecting growth of 1.5 to 2.0 percent next year," Schroeder said. "It must be our goal to achieve growth rates in the future above that." He said his pro-business reforms known as "Agenda 2010", which he plans to tout in New York, would play a key role in increasing economic growth. Growth has stagnated since 2001 and Germany is in danger this year of posting its first full-year contraction in a decade. GDP grew 0.2 percent in the third quarter but shrank 0.2 percent in each of the first two quarters.
DEMAND TO OBEY WTO RULING ON STELL TARIFFS
Schroeder, who will deliver a speech honouring Citigroup chairman Sandy Weill on Thursday, urged the United States to respect a World Trade Organisation ruling that tariffs on imported steel are illegal or face the "consequences". "Germany assumes that the United States will implement the WTO decision," he said. "That includes the dismantling of steel import tariffs as well as the unjustified subsidies for American exporters." But he hailed U.S.-German business relations and said he wanted to promote those ties. "I'm eager to explain my German economic reform programme 'Agenda 2010' and to promote Germany as a place to do business. We are an attractive place for investors, and the numbers back that up -- especially for American businesses," he said. Schroeder, who has become a vocal proponent of economic growth after years of promoting a "hands off" policy, said Germany's recovery would gain pace with his package of pro-business reforms, lower taxes and a global economic upturn. "I'm confident that the tax reform will be completed by the end of the year," he said, referring to his 22-billion euro tax cut package that passed the lower house of parliament but was stopped in the opposition-controlled Bundesrat upper house. A joint upper and lower house mediation committee has been trying to find a compromise on the reform package. The conservative opposition wants to force Schroeder to reduce the level of new borrowing before endorsing the tax cuts.
"We're eager to create better conditions for future growth by reforming the structures of the social welfare system and labour market to make them more efficient," said Schroeder, who had to fight to win over his centre-left Social Democrats. The Agenda 2010 reforms include tougher rules for the unemployed, benefit cuts, reductions in health care cover and a freeze on pensions. Schroeder launched the reforms this year to put the economy back on track for long-term growth. Describing himself as a fan of New York and an admirer of the city he said symbolises freedom, democracy and the free market, Schroeder said he has a special bond because his wife spent years in New York and her daughter was born there.//