Open

Coming up

Don't miss

Replay


LATEST SHOWS

FOCUS

US tobacco giants want lion's share of e-cigarette business

Read more

ENCORE!

Bold and bonkers: Kate Bush is back on stage

Read more

THE INTERVIEW

Simon Serfaty, US foreign policy specialist

Read more

IN THE PAPERS

'It's a War, Stupid!'

Read more

BUSINESS DAILY

French PM calls on ECB to go further to help economy

Read more

IN THE PAPERS

'I love the Socialists'

Read more

WEB NEWS

Ukraine: Web users call for international assistance

Read more

WEB NEWS

France: Fighting political corruption with transparency

Read more

MEDIAWATCH

No strategy and a beige suit

Read more

  • Ukrainian forces retreat from Luhansk airport after clashes

    Read more

  • Iraqi forces free Armeli in biggest victory over IS militants since June

    Read more

  • Teddy Riner, France’s unstoppable judo champion

    Read more

  • Monaco’s Falcao set for Man Utd loan on transfer deadline day

    Read more

  • Spain orders custody for parents of ill British boy

    Read more

  • Anti-government protesters storm Pakistan's state TV

    Read more

  • Putin calls for talks on 'statehood' for east Ukraine

    Read more

  • Poland marks 75 years since German invasion of WWII

    Read more

  • Israel appropriates large tracts of West Bank land

    Read more

  • Rescue efforts under way after French apartment block blast

    Read more

  • Web doc on French self-immolation protests takes top prize

    Read more

  • PSG trounce Saint-Etienne 5-0 with Ibrahimovic hat trick

    Read more

  • Tension rises in Hong Kong as Beijing rejects open elections

    Read more

  • French police stop 'teenage jihadist' from flying to Syria

    Read more

  • Kidnapped Yazidi women 'sold to Islamists' in Syria

    Read more

  • Confusion reigns after Lesotho 'coup'

    Read more

German cabinet approves stimulus package

Text by AFP

Latest update : 2008-11-05

The package, designed to help Europe's biggest economy avoid the worst effects of a global slowdown, aims to stimulate €50 billion of investment in 2009 and 2010.

The German cabinet approved a stimulus package on Wednesday to help Europe's biggest economy and the world's top exporter avoid the worst effects of a sharp global slowdown before a hoped-for recovery in 2010.

"I believe we are agreed that we must act now ... and send a signal that we will have bad news in 2009 but that we want to do something about it," Chancellor Angela Merkel said. "With this we will build a bridge until things get better again in 2010."

The measures, approved less than three weeks after Berlin rolled out a 480-billion-euro (620-billion-dollar) rescue package for Germany's banks, are aimed at stimulating 50 billion euros of investment in 2009 and 2010 with cheap loans, tax breaks and infrastructure projects, the economy ministry said.

"With the package of measures passed today we are making a responsible contribution to securing growth prospects for our country. We are safeguarding investment in our future and therefore in valuable jobs," Economy Minister Michael Glos said.

Germany, which accounts for a third of eurozone activity, is widely expected to enter a serious slowdown and may already be in a technical recession if, as expected, output is found to have fallen for the second straight quarter in the July to September period.

Last Monday, the widely-watched Ifo indicator showed business confidence dropping in October to its lowest point in more than five years, and the government has slashed its 2009 growth forecast to just 0.2 percent, the slowest rate of growth Germany last suffered a recession in 2003.

Merkel has stressed that any measures would be "targeted", with Berlin highly critical of proposals by French President Nicolas Sarkozy -- whose country holds the current EU presidency -- for Europe-wide state intervention on a massive scale.

Instead the package, which the government said would cost 23 billion euros, is smaller-scale. It includes 15 billion euros of state-guaranteed loans for cash-strapped firms and eight billion euros worth of infrastructure investment over 2009 and 2010.

Berlin also wants to combine the measures with progress on reducing the country's carbon footprint by hiring construction firms to make public buildings such as schools and hospitals more energy efficient, and through tax incentives on cars, particularly low-emissions models.

This in turn is aimed at giving a helping hand to Germany's huge but struggling automakers like Volkswagen, Daimler and BMW, who so far have been hit hardest by the global cool-down. Merkel also wants to switch to an emissions-based car tax system.

One casualty of the government's efforts -- coupled with an expected fall in tax revenues because of the slowdown -- has been Merkel's aim to achieve a balanced federal budget in 2011. On Tuesday Merkel said the new aim was to manage this in the next legislative period, which runs to 2013.

Gernot Nerb, chief economist at the Ifo institute, told AFP said that many of the measures such as the state-guaranteed loans, making certain assets and costs tax deductible and bringing forward infrastructure investment would help stimulate economic activity.

But other experts say the measures do not go far enough, and the public is also sceptical: An Emnid opinion poll in Bild am Sonntag suggested that 70 percent of Germans feel that Merkel's measures will prove futile.

The package comes a day before the European Central Bank was widely expected to provide further support to the economy by slashing interest rates, a month after the ECB, the US Federal Reserve and five other central banks lowered rates in an exceptional coordinated action to boost financial markets.

Date created : 2008-11-05

COMMENT(S)