German states asked to decide on projects for new stimulus package
German state officials agreed on Tuesday to have concrete proposals ready in early January for a new economic stimulus package. The plan, which could total up to €40 billion, will target infrastructure projects.
The package, which aims to stimulate Germany’s moribund economy, will focus on investment in roads, broadband Internet access, energy efficiency projects, and schools and universities. It would also lower contributions to Germany’s public health care system by one percentage point.
“All in all, we want to take measures that will have a sustained effect on the federal, state and municipal levels and which will boost the economy,” said Thomas de Maizière, Merkel’s chief of staff. “It’s about strengthening Germany by modernising its infrastructure.”
Leaders will meet again on January 5 for further discussion of the stimulus package, which is supposed to be passed next month. The new package follows a first round of measures passed earlier this month to help the country fight recession.
In additional to the infrastructure projects, German Economy Minister Michael Glos of the conservative Christian Social Union is demanding €25 billion in tax cuts. “Lowering income taxes brings together what is necessary in the short term with what is right in the long term,” he said.
Some conservative politicians have threatened to block the new stimulus package unless it includes the tax reductions. But Chancellor Angela Merkel, as well as the Social Democratic Finance Minister Peer Steinbrück, has come out against any cuts in tax rates.
Sigmar Gabriel, Germany’s environment minister, has warned against what he called an “orgy of road construction.” In Tuesday’s Frankfurter Rundschau newspaper, Gabriel said investments should be directed towards noise protection measures, street repair and rail projects.