Government crafting economic rescue plan

Government crafting economic rescue plan
Shipping containers in the port city of Hamburg. Photo: DPA
The German government is putting together a €30 billion economic stimulus plan as the economy worsens, according to press reports published on Sunday.

Economy minister Michael Glos told Bild am Sonntag that the plan, which the Cabinet will approve next week, will either “assure or create about a million new jobs.”

According to Der Spiegel, the 16-point plan will include tax breaks for companies buying new equipment, €15 billion worth of state-backed credit guarantees for small and medium-sized companies, a further €3 billion worth of energy-saving investments for German communities and €3 billion more for infrastructure and transit projects. Last week, the government also temporarily lifted the tax on new cars to boost the auto industry.

German economists are sceptical about the likely impact of the government’s plans, though.

“I expect nothing from this program,” said Klaus Zimmermann, head of the German Institute for Economic Research in an interview with television broadcaster ZDF, adding that the government’s plans were too narrowly focused.

Instead, Zimmermann called for an elimination of the so-called “solidarity surcharge” that West German taxpayers pay to finance reconstruction in eastern Germany. That would have an immediate effect on consumer spending, said Zimmermann.

Confidence in the German economy has been steadily dropping as the financial crisis worsens. Germany is the world’s largest exporter, which makes companies particularly vulnerable to a world economic slowdown.

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