BMW-Riding German Finance-Minister-in-Waiting Says Slash Taxes
The man who may become Germany’s finance minister after next month’s elections, Hermann Otto Solms, says tax and spending cuts are needed to lift the nation out of its worst economic crisis since World War II.
“We believe that tax reductions are good for growth and employment and if you have more employees you have more taxpayers,” Solms said in an interview on Aug. 25 in his Berlin office overlooking the 19th century Reichstag building that houses parliament. A “big tax reform” is a non-negotiable demand for potential coalition talks after the Sept. 27 vote.
Solms, 68, a vice-president of Germany’s parliament who rides a BMW motorcycle, wants to guide his Free Democratic Party back to power after 11 years in opposition. Chancellor Angela Merkel says she wants to dump her current Social Democratic coalition partner and govern with the FDP. Polls since December have given the two allies a combined 50 percent or more, enough to form a government.
If replicated on election day, Solms, the FDP’s finance policy spokesman, is a leading candidate to replace Social Democratic Finance Minister Peer Steinbrueck, a persistent critic of what he terms the “Anglo-American” financial model.
“Solms will be the next finance minister,” said Friedrich Thelen, former parliamentary editor of the business magazine Wirtschaftswoche and founder of Thelen-Consult, a Berlin-based business advisory group. “There’s nobody else.”
Record Borrowing
If he gains office, Solms will inherit falling tax revenue and borrowing forecast to surge to a postwar record. The budget posted a 17.3 billion-euro ($24.7 billion) deficit in the first half of this year as the government boosted subsidies for companies to keep workers on the payroll during the crisis, the Federal Statistics Office said Aug. 25. The budget was close to balanced in 2008.
Solms’s party leader, Guido Westerwelle, criticized the government’s first stimulus package, worth 50 billion euros, as the “most expensive election campaign in German history.”
While Solms said he didn’t want to talk about Cabinet posts before the vote, he said he has no illusions about how difficult it will be for Germany’s next finance minister to reassert budget discipline.
“In the finance ministry you are responsible for everything,” Solms said. “Finance ministers are never loved. Yet just like an executive who takes over a company in a crisis one has a chance to really improve things.”
Kohl, Brandt
The FDP last served in government under Christian Democrat Chancellor Helmut Kohl from 1982 to 1998. From 1969 to 1982, the party was junior partner in the governments of Social Democratic Chancellors Willy Brandt and Helmut Schmidt.
If the FDP doesn’t win enough votes in four weeks to rule with Merkel, Solms said he’ll recommend the party stay in opposition rather than seek an alliance with the Social Democrats.
The FDP’s platform calls for simplified, lower income tax rates between 10 percent and 35 percent. Germany’s top income tax bracket is currently 45 percent and the lowest is 14 percent. The CDU wants to drop the lowest bracket to 12 percent and raise the threshold for the 45 percent rate to 60,000 euros from 52,000 euros.
The FDP also wants to revamp inheritance tax on family businesses, which Solms said “is driving lots of business people abroad.”
While praising what he called Merkel’s swift reaction to the global financial crisis last year, Solms said Merkel’s bad- bank law was problematic because “no bank will take advantage of it unless they’re on the brink of insolvency.”
He also condemned Merkel’s moves on bank supervision, saying “here, nothing has happened.”
Aristocratic Title
An aristocrat from Hesse in central Germany, Solms’s full name is Hermann Otto Prince zu Solms-Hohensolms-Lich. He said he decided to drop the title “because I am a convinced democrat and people should be measured by their achievements and not by their origins.”
Solms never knew his father, a Luftwaffe fighter pilot, who was killed during World War II shortly before his birth. He said among his earliest memories as a 4-year-old boy was the arrival of American troops in March 1945.
“I have this image of the Americans rolling into our village with their tanks,” he said. “It was a feeling of relief.”
Solms studied agricultural economics in the U.S. from 1969- 1970 at Kansas State University in Manhattan, Kansas.
“Naturally, one gets to know the American soul better in the Midwest rather than in New York,” Solms said. “That’s why I still think I can understand Americans better.”
Thelen said Solms’s almost 30 years in parliament means he knows how to navigate the pressures faced by the man responsible for the nation’s finances.
“They’ll need someone as a power-broker and Solms will do it,” Thelen said.