Chancellor Angela Merkel announced a historic stimulus package for the German economy on Wednesday, which will include cutting VAT, subsidizing families and even buying electric cars.
Germany announced on Wednesday June 3 a gigantic package of 130 billion euros over two years to stimulate its economy weakened by the coronavirus pandemic.
This plan aims not only to support supply, through the reduction of value added tax or new aid to companies in difficulty, but also demand through subsidies to families or an increase in the premium for for electric cars.
These investments must be made now “because we want to make the future possible especially for the next generations,” Angela Merkel said Wednesday evening after two days of tough negotiations between conservatives and social democrats, the partners of the government coalition.
“Responsibility for Europe”
“So we have an economic recovery plan, a plan for the future and, of course, on top of that, we are now taking care of our responsibility for Europe and the international dimension,” she said. .
She was alluding to the project she is currently carrying out with French President Emmanuel Macron to establish mutual debts between European Union (EU) countries to revive the European economy in the face of the coronavirus.
Even if Germany has so far been less affected by the pandemic on its human level than its neighbors, with some 8,500 dead, its economy, very dependent on exports, has been badly shaken.
This stimulus plan is in addition to the huge plan of more than 1,000 billion euros set up in March, at the height of the pandemic, providing aid to businesses and billions of euros in guaranteed loans.
Support for the automotive sector
Among the measures announced Wednesday are, in addition to the temporary drop in VAT from 19% to 16% until December 31, 2020 (from 7% to 5% for the reduced rate) and debt transfers from municipalities to the federal state , a one-off allowance of 300 euros per child for families or a drop in electricity costs for individuals, according to the 15-page agreement.
The most discussed point was the introduction of a purchase bonus to support the automotive sector, practically stopped for several months. The Social Democrats (SPD), who opposed any subsidy of polluting cars, seem to have won the battle here: in the end, the members of the “grand coalition” voted against a premium for the purchase of cars from gasoline or diesel with low emissions. However, the premium for the purchase of an electric vehicle will be doubled, from 3,000 to 6,000 euros.
The agreement concluded also promotes the acceleration of the renovation of buildings for the coming years: the program encouraging in particular the installation of more climate-friendly heating systems will now increase by one billion euros to be brought to 2.5 billion.
“A wasted opportunity”
One of the representatives of the die Linke radical left, Bernd Riexinger, however, spoke of “a wasted opportunity”, saying that social support measures were not enough.
While Germany saw its unemployment rate continue to climb in May, to 6.3%, pushing companies to apply for partial unemployment for more than 11 million workers since March, the government wanted to lend its support again companies in difficulty. Up to 25 billion euros will be released to help the most affected sectors.
Angela Merkel justified this aid to support the millions of workers currently on short work: “This shows how fragile the whole (of the economy) is and that it is necessary to succeed in stimulating the economy if jobs are to be insured “.