Over the weekend, German Chancellor Angela Merkel announced her new coalition government. For the past four weeks, Merkel, the leader of the Christian Democrats (CDU) has been negotiating these arrangements with her party's coalition partner, the Free Democrats (FDP), led by Guido Westerwelle. Those talks followed the general election last month, in which the CDU and FDP between them won enough parliamentary seats to form a majority coalition, and send the CDU's previous coalition partner, the Social Democrats (SPD), into opposition.
Merkel said that tax cuts will be a key part of her government's program. The FDP have been the strongest German advocates for lower taxes.
Many of the center-right parties in Continental Europe would not be considered all that right-wing by American standards. The governments of Nicolas Sarkozy in France and Silvio Berlusconi in Italy maintain a larger and more intrusive role in economic life than American Republicans have traditionally been comfortable with. (However, even they became a bit too comfortable during George W. Bush's presidency.)
In Germany, the CDU started out in 1949, implementing the Wirtschaftswunder (economic miracle) that enabled their country to recover from the devastation of World War II. Their initial leaders, Chancellor Konrad Adenauer and Economics Minister Ludwig Erhard, pursued free-market policies that restored West Germany to economic preeminence in Europe. Later CDU leaders strayed from that course.
The FDP, called "liberal" according to the European understanding of that term, which is closer to what we call "libertarian" over here than it is to our understanding of "liberal", will provide some market-oriented backbone to the softer Christian Democrats.