Merkel is back in power with a vow that tax cuts are on the way

German Chancellor Angela Merkel committed her government to tax cuts just 24 hours after being re-elected.

However, she would not say when the cuts would be introduced.

‘We want to do two steps … these could be in 2011 and 2012, or they could be 2011 and 2013 or they could be in 2012 and 2013,’ she said.

Victory: German Chancellor Angela Merkel greets supporters during an election party in Berlin

Victory: German Chancellor Angela Merkel promised tax cuts, but would not say exactly when they would be introduced

Mrs Merkel was speaking at a news conference after her conservatives won a parliamentary majority in the election with the Free Democrats (FDP), her partner
of choice, enabling her to end an awkward four-year-old coalition with the Social Democrats.

The two centre-Right parties will now try to forge compromises on a range of issues including tax.

While Mrs Merkel refused to give a timeframe, the FDP campaigned for quick cuts worth 35billion euros.

Mrs Merkel nearly lost an election in 2005 when she pushed for a tax-cutting, deregulatory, privatising government, forcing her into the coalition with the Social Democrats.

The FDP has also signalled it wants to slash the top rate of income tax from 50 per cent to 35 per cent. Mrs Merkel is not expected to agree to such a significant cut although she does believe that reducing taxes will boost the growth of one of Europe's biggest economies.

She is also expected to do battle with the FDP over civil liberties. The party wants to reduce the amount of surveillance on citizens in Germany, introduced as part of the War on Terror, despite a new video from Al Qaeda threatening attacks over the country's involvement in Afghanistan.