German coalition agrees hike in healthcare tax

BERLIN, Oct 5 (Reuters) - Top officials in Germany's ruling coalition on Sunday agreed to increase mandatory contributions to state healthcare providers and offset the extra burden by trimming unemployment benefit levies.

Coalition officials meeting in Berlin backed Social Democrat (SPD) Health Minister Ulla Schmidt's plan to raise the healthcare contribution level to 15.5 percent of gross wages from around 14.92 percent.

As a counter measure, the unemployment benefit levy will drop to 2.8 percent from 3.3 percent, said Volker Kauder, parliamentary group leader of the conservatives (CDU/CSU), who share power with the SPD.

Conservative Chancellor Angela Merkel said in a newspaper interview on Sunday that due to the economic situation the government would do all in its power to make sure that the financial burden on workers did not rise at the start of 2009.

"The planned further reduction in jobless benefit contributions is a decisive step in this direction," Bild am Sonntag quoted her as saying.

The move to raise healthcare contributions has been condemned by business lobbies.

"Employers and workers will be massively burdened and the labour market will take a battering," Ludwig Georg Braun, president of the DIHK chambers of industry and commerce, told Saturday's Neue Presse newspaper.

Dieter Hundt, head of the BDA employers' lobby, told Bild the planned contribution level for state health providers was the result of "a botched health reform and frivolous promises to doctors and hospitals".

Merkel's cabinet is likely to back Schmidt's proposal at its session on Tuesday. (Reporting by Iain Rogers; Editing by Louise Ireland)