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Friday, 26 November, 1999, 15:22 GMT
German budget cuts approved
Schröder The chancellor wants to cut federal spending by 30bn marks

The German parliament has approved a controversial austerity budget that cuts spending on social welfare.

The lower house of parliament, the Bundestag, passed 16bn marks ($8.5bn) of cuts in a vote on the final half of the plan, after four days of heated debate.

But the upper house, the Bundesrat, blocked the 4bn marks of that sum that required its approval, referring it to a parliamentary mediation committee.

Passage of the budget means Finance Minister Hans Eichel has won approval for 26bn marks of savings, out of an overall target of 30bn marks.

Mr Eichel has vowed to reach his savings target by finding alternative cuts which do not require upper house approval.

The finance minister has said the government's goal is to balance the budget by 2006 to restore Germany's competitiveness.

Addressing the upper house earlier, he said the austerity measures were in the interest of state and local governments as well as the federal government.

Election defeats

The Bundesrat did pass additional increases in energy taxes. From 1 January, petrol tax will rise by six pfennigs per litre per year over the next four years, with levies on other energy forms also rising.

Chancellor Gerhard Schröder has made the austerity cuts the centrepiece of his government's economic plan to revive Europe's largest economy.

But the moves have been unpopular with voters and provoked protests throughout Berlin.

The BBC Berlin correspondent says the measures have contributed to a series of defeats in regional elections for the governing coalition of Social Democrats and Greens.

Many state premiers believe the cuts will increase their financial burdens.

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