German Government Approves Stimulus Package
The German government on Wednesday approved a stimulus package aimed at helping Europe's biggest economy weather the financial crisis, with measures including tax breaks on new cars and credit assistance for companies.
The package of tax breaks and spending measures, most to take effect over the next two years, is aimed at triggering investments of up to 50 billion euros ($64 billion), Economy Minister Michael Glos said.
"We want to strengthen the real economy's powers of resistance and we know, of course, that the next year will not be easy in economic terms," Glos said at a news conference.
The legislative proposal, which is expected to cost the government 23 billion euros ($29 billion) through 2012, comes after the government last month drew up a separate program worth as much as 500 billion euros ($640 billion) to shore up Germany's banking sector, offering capital injections and credit guarantees.
The stimulus package includes a one-year holiday on tax for new cars, and a two-year holiday for tax on the most environmentally friendly vehicles.
"We know what significance the automobile industry has for our country -- every sixth job is connected with it, and so it is a particular concern," Glos said.
Germany is home to car makers such as Daimler, Porsche, Volkswagen and BMW.
Automakers across Europe have scaled back production as the financial crisis prompts consumers to hold off purchases.
The package also includes a 15 billion-euro ($19 billion) program to help ensure that small and medium-sized companies are kept flush with credit while banks remain reluctant to lend.
The government plans to pump an additional 3 billion euros ($3.8 billion) into a program aimed at making buildings more energy-efficient; and 2 billion euros ($2.5 billion) into transport infrastructure projects.
Germans will be able to claim tax breaks for having their homes renovated to make them more environmentally friendly.
In an effort to keep people in jobs, the government also plans to extend from 6 to 18 months the period over which employees put on reduced working hours can claim benefits to top up their income.
The package needs parliamentary approval, but the coalition government of conservatives and Social Democrats has a large majority.
Chancellor Angela Merkel has acknowledged that the government's moves to shore up banks and the wider economy may force it to defer its aim of delivering a balanced budget in 2011.
On Tuesday, she said it now aims to reach that target by the end of the next German parliament's term in 2013.
The government recently slashed its economic growth forecast for 2009 to just 0.2 percent from 1.2 percent.
Last month, a closely watched survey showed business confidence sliding to a five-year low.