Germany unveils €50-billion second stimulus
29 Jan 2009
The German government has approved a second economic stimulus package of €50 billion ($66.8 billion / Rs320,450 crore) over the next two years, to jump-start Germany out of its most severe postwar recession thereby boosting Europe's biggest economy.
The stimulus package, agreed by Chancellor Angela Merkel's coalition parties last fortnight includes public investment in infrastructure projects such as roads, railways and schools; cuts in income tax and steps to lower health insurance payments and unemployment insurance. A boost to the car industry in the form of an ''exchange offer'' to trade old cars for new or somewhat used car.
Chancellor Angela Merkel said that the economic package was in response to tide over the global economic crisis. "We will ensure that the measures are implemented as soon as possible." she added.
The package is aimed to help German economy withstand the current financial crisis and develop into stronger economy, she said.
This package is the second government stimulus program after the €32 billion approved in November, taking the total stimulus, the biggest economic booster in Europe to €82 billion or about 1.6 per cent of GDP (gross domestic product). The November stimulus was widely criticised as inadequate to revive the economy.
The German government will have to borrow more money to pay for these measures, which increase infrastructure investment and lower taxes.
Chancellor Angela Merkel said "most difficult domestic political decision" was to increase new borrowing, but promised to set up a system to ensure the repayments.
The government is expected to announce a supplementary budget for 2009 in order to finance this package, which will increase the net borrowing to €36.8billion, more than twice the amount originally planned for 2009.
The International Monetary Fund (IMF) expects Germany's economy to contract by 2.5 per cent in 2009.
Like Japan, Germany, one of the world's leading exporters, is badly hit with foreign demand for its manufactured goods slumping. The number of people axed from their jobs rose for the first time in 33 months in December.
The car industry was battered by global slowing of demand as exports, particularly to the US plummeted causing orders to decline for German manufacturer.
The good news is that the federal statistics showed Germany as the world's largest exporter, in-spite of the current crisis, slightly ahead of China.
The debate on the package will begin in the lower house of parliament and a vote is expected on 13 February.
The new package could be also a ploy to garner votes in the upcoming general election at the end of September, according to German News Agency DPA report.
