Left Menu
Development News Edition

German coalition parties agree 130 bln euro stimulus package

Reuters | Updated: 04-06-2020 04:05 IST | Created: 04-06-2020 04:05 IST
German coalition parties agree 130 bln euro stimulus package

Chancellor Angela Merkel's ruling coalition on Wednesday agreed a bumper stimulus package to speed up Germany's recovery from the coronavirus

Speaking at a news conference after marathon talks that extended well into the night, Merkel said the package would amount to 130 billion euros ($146 billion) and include lower value-added tax (VAT) to boost consumption. "The size of the package will amount to 130 billion euros for the years 2020/2021, 120 billion of which will be spent by the federal government," Merkel said. "So we have an economic stimulus package, a package for the future."

The stimulus programme follows a 750 billion-euro rescue package agreed in March which encompassed a debt-financed supplementary budget of 156 billion euros. Germany's measures, which together with liquidity aid and loan guarantees equal more than 30% of its economic output, go substantially beyond any other national emergency programmes launched by other euro zone countries.

Merkel said VAT will be reduced from 19% to 16% for six months starting in July 1. A lower VAT rate for hospitality of 7% would be lowered by two points over the same period. The overall cost of the VAT measures amount to 20 billion euros. Finance Minister Olaf Scholz said the package will be partly financed by additional net new borrowing. Some 60 billion euros of the 156 billion euros in new debt approved in March have not been tapped, he added.

Germany can afford generous spending splurges given it had a balanced budget since 2014 and had a debt to output ratio of 60% before the pandemic, well below euro zone partners like Italy, Spain and France. "We can do this because we economised well in recent years," said Scholz. "We want to come out of this crisis with vigour."

The package also includes at least 10 billion euros a year to help municipalities struggling with lower tax receipts with public spending on infrastructure and housing. The sheer scale of Germany's new spending splurge has raised concerns among officials from economically weaker countries that the discrepancy in aid measures could worsen imbalances in the bloc and distort the European Union's single market.

The measures also include a one-time, 300-euro stipend per child to help families as well as a doubling of incentives to promote the sale of electric cars. Germany has weathered the crisis better than many of its European neighbours.

Widespread testing, a robust healthcare system and restrictive measures have helped it keep deaths relatively low. The economic impact of the crisis has also been cushioned by a decision to keep factories and construction sites open as well as generous government financial assistance to businesses and freelancers. The economy is expected to shrink by 6.3% this year, sinking into its worst recession since World War Two.

In a concession to the SPD, Merkel's conservatives dropped demands for cash incentives to promote the sale of combustion engine cars. The SPD appeared to have partly given up on a 57 billion-euro package to help municipalities, especially those with high debt. ($1 = 0.8903 euros)

(Writing by Joseph Nasr; Editing by Lisa Shumaker)


TRENDING

OPINION / BLOG / INTERVIEW

Pride in the time of coronavirus: a welcome move online?

This year is different in many ways not least as celebrations are also taking place against the dramatic backdrop of a global health crisis and a resurgence in grassroots activism following the death of George Floyd in Minneapolis. ...

COVID-19: Weighing up the benefits and limitations of edtech platforms

Edtech companies shouldnt focus on merely pushing contents, but to provide an interactive, effective teaching and learning environment. ...

Shipping industry's COVID-19 resilience test could boost digitalization

The push towards digitalization in shipping industry was already happening and has been further accelerated by the pandemic as current practices are not tenable under present circumstances and would definitely not be in the future....

Health is pure science but why objectivity eludes WHO

We certainly need a global body to coordinate responses against health emergencies. However, this sheer need of humanity on this planet should not be milked by the World Organization WHO to overshadow constructive criticism and call for ref...

Videos

Latest News

Delhi CM Arvind Kejriwal inaugurates plasma bank at ILBS for benefit of COVID-19 patients.

Delhi CM Arvind Kejriwal inaugurates plasma bank at ILBS for benefit of COVID-19 patients....

Karnam Sekar retires as Indian Overseas Bank MD & CEO

Public sector Indian Overseas Bank IOB on Thursday said its managing director and chief executive Karnam Sekar retired on June 30. The lender in a regulatory filing said Karnam Sekar has demitted office as MD CEO of the bank on June 30, 20...

Primark encouraged by post-lockdown sales but profit to slump

Trading in British fashion chain Primarks reopened stores has been encouraging but the prolonged coronavirus lockdown means the retailers full-year profit is likely to slump by about two thirds, owner Associated British Foods said. All 375 ...

Fire breaks out at Iranian nuclear facility, no damage reported, officials say

A fire broke out at Irans Natanz nuclear facility but there were no casualties and the site is operating, as usual, Iranian officials said on Thursday.The Natanz Fuel Enrichment Plant FEP, covering 100,000 square meters and built eight mete...

Give Feedback