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Merkel's Cabinet Backs Nuclear Tax in $102 Billion Savings Plan
2010-09-01 08:39:13.76 GMT
By Brian Parkin and Nicholas Comfort
Sept. 1 (Bloomberg) -- Chancellor Angela Merkel's Cabinet
backed a tax on nuclear power-plant operators, shunning
utilities and German industry as the government holds to budget
cuts it says are needed to protect the euro.
Ministers meeting in Berlin today approved the nuclear levy
alongside a four-year program of spending cuts and revenue-
raising measures worth about 80 billion euros ($102 billion),
the government press office said. The draft legislation will now
go to parliament for consideration.
Merkel is sticking to the savings plan even after the
economy, Europe's biggest, expanded at the fastest pace in 20
years in the second quarter. Economy Minister Rainer Bruederle
said now is the time to cut spending.
"The government's economic stimulus measures were with
good reason only meant to be temporary," Bruederle said today
in an e-mailed statement. "What could possibly be a better time
to start exit measures than now when the economy's growing
strongly?"
The savings program, as first outlined in June, includes a
financial-transaction tax on banks of about 2 billion euros per
year from 2012, an air passenger tax, welfare cuts, reductions
in defense spending and a delay in the rebuilding of Berlin's
royal palace. Finance Minister Wolfgang Schaeuble is scheduled
to brief reporters on the package at 11:30 a.m. in Berlin.
Ackermann Rebuffed
Merkel rebuffed pleas to drop the nuclear levy made in an
open letter last month signed by the chief executive officers of
E.ON AG and RWE AG, Germany's biggest utilities, plus Deutsche
Bank AG's Josef Ackermann and BASF SE's Juergen Hambrecht. In
it, they said a policy of "helping the budget with new energy
taxes blocks necessary investment in the future."
The coalition will implement the nuclear tax "as budget
consolidation means accessing additional revenue sources," a
copy of the draft bill posted on the Finance Ministry website
said. The utilities may seek to pass on some of the cost of the
tax to companies and consumers, the draft said.
Dusseldorf-based E.ON fell 1.3 percent to 21.91 euros as of
10:30 a.m. local time in Frankfurt trading, while smaller
competitor RWE of Essen declined 1.4 percent to 50.96 euros.
Both companies have fallen about 25 percent this year, making
them two of the worst-performing members of the benchmark DAX
index. Of the 30 DAX companies, only HeidelbergCement AG has
performed worse.
'Cold Shower'
Announcement of the levy hit the utilities "like a cold
shower," Theo Kitz, an analyst with Merck Finck in Munich, who
has "sell" recommendations on E.ON and RWE, said yesterday in
an interview.
"They reacted pretty aggressively, with media campaigns
and the lobbying that is usual in this industry," he said. Even
so, "it's pretty clear the tax is coming. It'll be a weight on
them, especially on their cashflow. The utilities will probably
invest less in coal- and gas-fired power plants as it looks like
the government will commit them to funding renewable energy
projects."
Merkel's government, near historic lows in opinion polls,
faces public opposition to plans to extend the running life of
nuclear-power plants as part of an energy policy to be announced
by the end of September. Merkel said Aug. 30 that an extension
of 10-15 years was "sensible."
"The nuclear tax is pretty frustrating for the utilities,
but the nuclear issue as a whole is by no means a done deal,"
said Steffen Manske, an analyst at National Bank AG in Essen,
who recommends investors "buy" shares in E.ON and RWE. "E.ON
and RWE have already grown outside of Germany, where this tax
won't have any influence. It's a very international business."
For Related News and Information:
Top German stories: TOPG <GO>
Europe's debt crisis: CRISIS <GO>
Developed Market Monitors: DMMV <GO>
Top Power news: PTOP <GO>
--With assistance from Tony Czuczka in Berlin. Editors: Alan
Crawford, Leon Mangasarian
To contact the reporters on this story:
Brian Parkin in Berlin at +49-30-70010-6229 or
bparkin@bloomberg.net;
Nicholas Comfort at +49-69-92041-213 or
ncomfort1@bloomberg.net.
To contact the editor responsible for this story:
James Hertling at +33-1-5365-5075 or jhertling@bloomberg.net
