German coalition talks begin under fuel tax cloud

The Greens, who helped keep Chancellor Gerhard Schroeder in power, have said they hope to translate their best ever general election result into more green policy in government, but are set for a battle with Schroeder\'s party. Wednesday afternoon\'s meeting is an agenda-setting exercise ahead of substantive talks to begin on Monday. However, the Greens already gave hints they were keen to include rises in the politically sensitive energy tax in a coalition agreement. Greens parliamentary leader Kirsten Mueller said the party wanted at least to abolish a number of exceptions to the tax on gasoline, gas and electricity which the Greens launched in 1999. The talks begin after the release of Germany\'s latest business confidence figures showing German industry is becoming gloomier about its prospects. Many in industry, critical of the tax when it was first introduced, wondered whether Europe\'s largest economy could stomach another rise in the price of fuel. Adolf Zobel, deputy head of the German Road Hauliers Association, told Reuters German transport firms were paying an average of 7,000 euros per year more than their European competitors for every truck. \"We\'ve seen competition just getting tougher and tougher, particularly with a growing number of eastern European hauliers. Eco-tax is a chain around our ankles and is costing thousands of jobs,\" he said. Conservative-leaning Bild newspaper also led a public campaign against the tax, bemoaning a potential rise in the cost of flights as well as heating with the country hit by a cold snap. \"Yet more eco-tax?\" Bild asked on its front cover. RECESSION? Economists and business chiefs, meanwhile, debated whether Germany was tumbling back into recession. Ifo institute President Hans-Werner Sinn said indicators did not point to one, but was his optimism was muted. \"Pessimism is very pronounced at the moment, but the actual conditions have improved - this might continue in the coming months,\" Sinn said after the Ifo business climate index fell for the fourth month in a row. The Greens stress their fuel charge is tax-neutral, with a compensating reduction in employees\' and employers\' pension contributions. They say it has also created jobs. However, four years after calling for an increase in the price of gasoline to five marks per litre and a 100 kilometre (60-mile) per hour speed limit on the autobahn, the Greens have toned down their promises. The Greens campaigned pledging \"further development\" of the eco-tax, but without a proposed rate of increase. Motorists saw an additional tax of 12 euro cents per litre on their fuel bills, while tax on electricity rose by 1.8 cents per kilowatt hour. A final stage is due on January 1 with a further three cents for gasoline and 0.26 cents on electricity. Stefan Krug, lobbyist for Greenpeace, is one of few people expressly calling for a further rise. \"It\'s tax-neutral. You increase the cost of energy, but decrease the cost of labour. It also stimulates energy initiatives in energy conservation and renewables,\" Krug said, estimating the tax had created 250,000 jobs. The Greens are nevertheless expected to be on the front foot on the labour market, where they have been pressing for greater reform than the Social Democrats. Conservative Edmund Stoiber, the losing chancellor candidate on Sunday, gave reform backers some hope this week, telling WirtschaftsWoche magazine the conservatives might approve the proposals of the government-sponsored Hartz Commission if mixed with their suggestions. Schroeder\'s Social Democrats have broadly accepted changes to Germany\'s tax and benefits system, proposed by a panel of experts headed by Volkswagen executive Peter Hartz. However, any reforms will require support from the opposition in the Bundesrat, Germany\'s upper house of parliament. Story by Philip Blenkinsop REUTERS NEWS SERVICE