* Merkel says Germany needs to help euro zone recovery
* Says wrong time to raise taxes, promises reforms
* Merkel ahead in polls before Sept. election
By Madeline Chambers
BERLIN, June 11 Chancellor Angela Merkel vowed
on Tuesday to pursue her two-pronged approach of budget
consolidation and strengthening domestic demand if she is
re-elected in September, adding that Germany had a duty to
support the euro zone economy.
Courting votes in a major pre-election speech to the
influential BDI industry association, Merkel attacked opposition
plans to raise taxes and said her tax and investment policies
had helped keep unemployment low and imports robust.
"We have taken all these measures because we have a
responsibility to boost domestic demand given the very fragile
situation in the euro zone," she said.
"In the long run, Germany can only prosper if Europe's
economy, in particular the euro zone economy, gets back on its
feet," she said. Much progress had been made in tackling the
crisis "but we're not yet at the end of the road", she added.
Polls indicate Merkel's conservatives will be the biggest
bloc after the election and she is likely to win a third term,
though she may have to ditch her pro-business Free Democrats
(FDP) coalition partners if they fare badly.
One option is a "grand coalition" with the opposition Social
Democrats (SPD) with whom Merkel shared power from 2005 to 2009.
Several euro zone countries have urged Merkel, who has
insisted that bailouts for debt-ridden euro states be tied to
tough austerity measures, to strengthen demand in Europe's
biggest economy which is traditionally reliant on exports.
In the last few months she has softened her tone as other
European leaders, especially France's Francois Hollande, have
put the accent on growth. Germany has introduced schemes to help
countries like Portugal and Spain combat youth unemployment.
Merkel insists austerity and growth are two sides of the
"(In Germany) It was possible to consolidate the budget and
boost domestic demand. So we are not only a stability engine but
a growth engine in Europe," she said, adding imports had
developed well to give Germany's a sound trade balance.
While her government aims to start paying back debt in the
next legislative period, she has no intention of raising taxes,
Merkel said. Both the SPD and their allies the Greens plan to
increase taxes on the rich if they get into government.
"Any irritation in the current climate is absolutely wrong
and therefore we will .. not raise taxes," she said.
Speaking after Merkel, her SPD challenger Peer Steinbrueck
told the BDI he would not tinker with corporate taxes and any
tax hikes would go to improving education and infrastructure.
Merkel said she wanted to continue the structural reforms
which had transformed a country that just over a decade ago was
known as "the sick man of Europe".
With an eye on demographic changes which threaten the pool
of skilled workers, Merkel said she wanted better integration of
immigrants and improved childcare to help women to work.
But her first task after the election would be a reform of
the renewable energy law, she said. Many companies are angry
about high energy costs driven up by the shift to green power.