Kohl accused in budget debate

Germany's opposition Social Democrats and Greens launched a bitter attack yesterday on the Chancellor, Dr Helmut Kohl, claiming that his centre-right government was bankrupt of ideas and was simply trying to hang on to power until next year's election. But the government and opposition showed signs of a willingness to compromise for the first time on plans to reform Germany's tax and pension systems.

The exchanges came during a budget debate in the Bundestag, with Dr Kohl predicting that the economy would grow by 3 per cent next year. He accused the opposition of painting an unfairly bleak picture of Germany's economic prospects and called on them to join him in pushing through necessary reforms.

"Let's look again at whether we can hold talks, regardless of all our past battles," he said in a personal plea to the Social Democrat leader, Mr Oskar Lafontaine.

Dr Kohl said that it would be impossible to attract foreign investment into Germany without a thorough overhaul of the tax system.

Mr Lafontaine responded by declaring that the SPD would agree to lower the top rate of income tax from 53 per cent to 49 per cent, although the party did not believe the measure was necessary. He insisted that it was more important to ease the tax burden on lower earners and to reduce social insurance contributions.

The SPD used its majority in the upper house of parliament in September to block a government plan to cut 30 billion deutschmarks (about £10 billion) in taxes and has promised to veto pensions reforms.

The Green leader, Mr Joschka Fischer, called on the Chancellor to defy his allies in the tiny Liberal Free Democrats (FDP) by seeking compromise with the opposition on the reform plan.

Dr Kohl's upbeat assessment of Germany's economic prospects is not shared by economic analysts, many of whom fear that economic difficulties in the Far East and South America could have a serious knock-on effect.