German Chancellor Gerhard Schroeder introduced a proposal to reduce the corporate-tax rate from 25 percent to 19 percent to promote growth and prevent job moving to Eastern Europe, where the tax burden is significantly less than in Germany.

Germany’s economy faced an unexpected decline in the fourth quarter and unemployment jumped to a postwar record of 5.22 million in February. Leading companies including Volkswagen AG, Europe’s biggest carmaker, and Robert Bosch GmbH, have been transferring jobs to other east European countries such as Slovakia, where a basic corporate-tax rate makes 19 percent.

According to the German Finance Ministry, German corporations’ total tax burden makes around 38 percent, comprising corporate tax, local business tax and the so-called``solidarity surcharge’’ for the reconstruction of eastern Germany.

Schroeder is urged to take actions since his Social Democratic Party is becoming in less favour in the run-up to elections in the state of North Rhine-Westphalia planned for May 22.

The corporate-tax cuts would be compensated by widening the tax base and closing loopholes, Schroeder said. The government’s desire to increase borrowing to finance tax cuts is restricted since Finance Minister Hans Eichel is making efforts to keep Germany’s public-sector deficit from breaking EU budget rules for a fourth year.

CDU leader Angela Merkel welcomed the chancellor’s proposal on the tax rate cut, though she demanded to disclose more details of the procedure of its implementation. Merkel and CSU leader Edmund Stoiber are to meet with Schroeder at the Chancellery in Berlin.

German President Horst Koehler had previously urged Schroeder, Merkel and Stoiber to give the highest priority to job creation during their meeting. Germany is ``not competitive’’ as regards tax, said Koehler, a former head of the International Monetary Fund, citing a World Economic Forum ranking that placed the country last among 104 countries for tax efficiency, according to Bloomberg.

Schroeder’s tax initiative serves an addition to a program that would promote economic growth by cutting red tape for those creating new companies, making investment of about 2 billion euros ($2.7 billion) in rail and road infrastructure modernization.