cuts to include further subsidies. i have already mentioned that the tax wedge in germany, which increased noticeably in the 1990s, poses a considerable impediment to growth. as well as relieving the burden of social security contributions, tax policy2, in particular, is faced with the task of lowering the high marginal tax rates in order to improve the incentives for labour supply, labour demand and capital formation. to achieve this, fiscal policy must likewise have a clear strategy and objectives, something which - to put it tactfully - has not always been in evidence in recent times. an extensive simplification of tax law would take us a big step forward. the widening of the tax assessment base associated with the abolition of current tax loopholes could be used to lower tax rates further. moreover, in the context of a comprehensive income tax reform, consideration could also be given to a further shift from direct to indirect taxes by abolishing current turnover tax reductions. a deterioration of investment conditions must concurrently be avoided, not least in view of the current weak growth and low fixed - capital formation. to this end, a reintroduction of the wealth tax must be rejected once and for all and the envisaged restriction of the facility for offsetting corporate losses against taxes must be abandoned. i am also sceptical of attempts to reform or even extend the existing local business tax. it would appear far more advisable to me - also with a view to simplifying the tax system - to abolish it and replace it by an add - on facility on income and corporation tax for local governments. as regards the taxation of investment income, the proposed tax amnesty could help to broaden the domestic tax base on a lasting basis through the repatriation of exiled money. however, in order to achieve this, a reliable perspective for the future taxation of investment income is particularly important. in this context the definition of a final tax rate would appear to be the right move. the social security system, which was characterised by a sharp increase in the contribution rate in the 1990s, from 35½ % in 1990 to over 41 % in 2000, are also in urgent need of reform. this is particularly essential because the social security systems in their current form cannot cope with the demographic developments. while relief can perhaps be expected for the unemployment insurance fund, provided there is a considerable reduction in the high level of unemployment, the pension insurance scheme, the health insurance fund and the long - term care insurance scheme

estimate looking at the effects of integration since the 1980s – so after postwar catching - up had run its course – finds a gain in per capita gdp of around 12 % relative to the non - membership scenario. 3 and the countries that joined the eu in 2004 and 2007, such as slovenia, have also shared in those gains. the increase in gdp produced by eu membership may turn out to be as high as 40 % for the 12 new members, 4 which would not be surprising, since the eu is by far the main trading partner for countries in central and eastern europe and the main source of fdi. today, some are questioning whether openness remains the best way to ensure our economic security. but we need to ask where we would be today if we had not had such a long phase of integration on our continent. and the likely answer is : much poorer. what is more, the single market has not only provided a foundation for growth, but also for sustaining open markets. as we are seeing today at the global level, markets cannot stay open for long if not all participants are perceived to be playing by the same rules, or if the benefits are seen to be shared unfairly. the single market has survived, in large part, because europe has built a unique model for managing those challenges. deepening the market in europe has entailed building common institutions to protect citizens from unfair competition or discrimination from abroad – namely the common regulatory framework enforced by the european court of justice. safeguards central to the european social model have been progressively embedded in european law, notably the charter of fundamental rights, to provide protection for the most vulnerable. and europe has forged the first redistribution system across countries to help prevent persistent regional inequalities. as early as the mid - 1970s, european funds were being used to support less developed regions or those threatened with industrial decline. from 2007 – 13, €350 billion was allocated in the eu budget to structural and investment funds. and let me add that slovenia was a net recipient of those funds, with annual investment financing amounting to, on average, onefifth of what the slovenian government spent on public investment. no one would claim this system of rules, safeguards and redistribution has been perfect. we know that some feel it improves their lives too little, and others that it intrudes into their lives too much. but what we have built in europe is a model for sustainable openness – one that can reap its gains while mitiga