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MONEY

Euro falls to 20-year low against US dollar

The euro sunk below $0.99 on Monday, a 20-year-low, following the announcement last week that Russia would cut off gas deliveries to Germany via the Nord Stream pipeline.

Published: 5 September 2022 09:08 CEST
Euro falls to 20-year low against US dollar
A $100-dollar bill is seen on top of Euro bills. The euro sunk below $0.99 on Monday, a 20-year-low.(Photo by DANIEL MUNOZ / AFP)

The euro fell 0.70 percent to 0.9884 dollars Monday at 0535 GMT, its lowest since December 2002.

The European currency has continued to weaken against the dollar since the start of the year, hammered by economic turbulence and uncertainties sparked by Russia’s invasion of Ukraine.

READ ALSO: What the dollar-euro exchange rate means for Americans in Europe

Russian gas giant Gazprom said Friday the Nord Stream pipeline due to reopen at the weekend would remain shut indefinitely.

It said it had discovered “oil leaks” in a turbine during a planned three-day maintenance operation, and that the pipeline would remain closed until it was repaired.

Resumption of deliveries via the pipeline which runs from near Saint Petersburg to Germany under the Baltic Sea, had been due to resume on Saturday.

Following the imposition of economic sanctions over the Kremlin’s invasion of Ukraine, Russia has reduced or halted supplies to different European nations, causing energy prices to soar.

The Kremlin has blamed the reduction of supplies via Nord Stream on European sanctions which it says have blocked the return of a Siemens turbine that had been undergoing repairs in Canada.

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TAXES

German cabinet ministers approve sweeping tax reform plans

The German cabinet has passed a series of significant income tax relief measures and tax class reforms, particularly affecting married couples and civil partners.

Published: 24 July 2024 16:13 CEST
German cabinet ministers approve sweeping tax reform plans

The changes are part of Finance Minister Christian Lindner’s (FDP) second annual tax law, a wide-ranging package of tax reforms that will now move to the Bundestag for approval.

The reforms are intended to adapt Germany’s tax system to the current high cost of living and address some inequalities in how couples are taxed. 

“It is simply a matter of fairness to adjust the tax system to inflation,” Lindner said at a press conference when introducing the proposals in June. “The state must not be the winner when there’s high inflation.” 

One of the cornerstones of the reform is the increase in the tax-free allowance – the amount employees can earn without being subject to taxation. 

This amount will increase by €180 to €11,784 this year and rise incrementally to hit €12,336 by 2026.  

The child tax-free allowance will also see gradual increases over this period, starting with €228 extra this year and rising to €6,828 by 2026, while the child benefit (Kindergeld) will also go up by €5 per month from 2025. 

READ ALSO: How Germany’s planned tax shake-up could affect you

Lindner has also set out plans to combat ‘cold progression’: a phenomenon whereby an increase in earnings is eaten up by inflation but taxed at a higher rate regardless. This means the income threshold for each tax bracket will be pushed upwards next year, with the exception of the highest tax rate. 

The top tax rate of 45 percent will still apply to incomes above €227,826, but the thresholds for the solidarity surcharge will be raised.

German Finance Minister Christian Lindner arrives for the weekly cabinet meeting at the Chancellery in Berlin

German Finance Minister Christian Lindner arrives for the weekly cabinet meeting at the Chancellery in Berlin on May 15th, 2024. Photo: Tobias Schwarz / AFP

Though Lindner managed to pass his reforms in cabinet on Wednesday, his centre-left coalition partners from the Social Democrats (SPD) and Greens have previously aired their scepticism about the reforms.

“You can’t demand drastic savings from other departments…and then demand tens of billions yourself without need,” Green Party finance expert Katharina Beck recently told Reuters, referring to recent budget cuts for departments like defence and infrastructure.

Describing the plans as “dubious”, Beck argued that they would primarily benefit the well-off. 

Changes for couples

A cornerstone of the reforms includes removing a loophole often used by couples with differing incomes to reduce their taxes. 

The current tax classes 3 and 5, which come with higher tax-free allowances and higher deductions respectively, are set to be abolished by 2030. Instead, couples will automatically be placed in tax class 4.

This change aims to distribute the tax burden more equitably between partners, reducing the need for end-of-year tax payments and addressing the perception that lower-earning partners’ work is undervalued.

However, the reform stops short of scrapping the marriage splitting system – known as Ehegattensplitting in Germany – which benefits couples with disparate incomes by combining their earnings for tax purposes.

READ ALSO: Ehegattensplitting – How did Germany’s marriage tax law become so controversial?

While many in the traffic-light coalition have spoken out against Ehegattensplitting, the FDP opposes its abolition, equating it with a significant tax increase for couples.

However, critics say the shared taxation helps perpetuate income disparity and part-time work among women.

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