• Germany's news in English

Merkel defends German stimulus package

AFP · 19 Jan 2009, 17:14

Published: 19 Jan 2009 17:14 GMT+01:00

Facebook Twitter Google+ reddit

As the global financial storm broke over Europe last year, Germany was initially reluctant to follow Britain, France and other economies in paying huge sums to bail-out banks and businesses feeling the strain.

But in what she called the hardest domestic decision she has had to make as German leader, Merkel last week proposed a new €50-billion ($66-billion) package to haul Europe's largest economy out of recession.

The measures come on top of a programme agreed in November that the government valued at 30 billion euros. The main thrust of the new package is a huge increase in public spending on roads, railways, hospitals and schools.

Other elements include cuts in tax and social security contributions, as well as incentives for consumers to trade in old vehicles for new "greener" cars to boost Germany's ailing auto sector.

Nevertheless, as Merkel outlined Monday in an article for the dailies Le Monde, La Stampa, Gazeta Wyborcza, Dagens Nyheter and El Pais, she remains concerned that mounting public debt will undermine eurozone stability.

"In a period of deep global degradation like the one we are going through, the single European currency is a priceless source of stability and security," Merkel wrote in her pan-European opinion piece. "If we didn't have the euro, the first lesson we would have taken from this crisis is that we would need to create it as quickly as possible. This is why Germany will continue to deliberately make the rules of the European growth and stability pact its own," she continued.

"In order to meet its national responsibility, the federal government has decided, in addition to having a plan to repay its debts, to lock long-term debt reduction into the German constitution."

Under the Maastricht Treaty, eurozone countries are bound to keep public deficits at under 3.0 percent of gross domestic product (GDP).

Since the crisis began, however, many European governments have embarked on massive spending sprees to recapitalise failing banks, bail-out struggling industries and create public sector jobs, breaching that level.

Germany is one of the staunchest advocates of fiscal discipline in the EU but finance minister Peer Steinbrück has acknowledged that his country will break the EU rules in 2010 with a deficit above four percent.

This gloomy outlook was confirmed earlier Monday by the European Commission which predicted a public deficit of 4.2 percent next year as the German economy slams into reverse in 2009.

Brussels said Germany's economy would shrink by 2.3 percent in 2009 – the worst slump since 1949 – before rebounding gradually to grow 0.7 percent in 2010.

Story continues below…

The rapidly weakening economy is also taking its toll on the labour market in Germany. Recent figures showed unemployment on the rise in December for the first time in 33 months to stand at over three million.

Germany's central bank, the Bundesbank, warned in its monthly report published Monday that firms' intention to hire more workers was dwindling.

Nevertheless, German companies are in a better shape than in previous downturns to survive the recession, the Bundesbank said, as they have used a more favourable economic environment in recent years to boost their capital reserves.

"This cushion is currently offering them protection against the increasing difficulties resulting from the slowing of the global economy and the continued crisis on the financial markets," the report said.

Facebook Twitter Google+ reddit

Today's headlines
Creepy clown scare spreads to Germany
Two of the clowns were apparently equipped with chainsaws. Photo: Pedro Pardo / AFP file picture

Police said Friday five incidents involving so-called scary clowns had occurred in two north German town, including one assailant who hit a man with a baseball bat, amid fears that Halloween could spark a rash of similar attacks.

Student fined for spying on women via their webcams
Photo: DPA

Student from Munich fined €1,000 for spying on 32 different computers, using their webcams to take photographs, or record their keyboard history.

This is how much startup geeks earn in Germany
Photo: DPA

A comprehensive new survey of 143 startup founders shows how much you are likely to be earning at a German startup, from entry level all the way up to sitting on the board.

Man dies after beating for peeing near Freiburg church
The Johannes Church in Freiburg. Photo Jörgens Mi/Wikipedia

A middle-aged man from southern Germany has died after being attacked by a group of men who took umbrage with the fact he was urinating in the vicinity of a church.

The Local List
Seven German celebrities with uncanny doppelgängers
Former Berlin mayor Klaus Wowereit and actor Alec Baldwin. Photo: DPA; Gage Skidmore, Wikimedia Commons

Check out these seven look-a-likes of well known German figures - we admit that some are more tenuous than others...

Israel seeks to buy three new German submarines: report
A Dolphin class submarine. Photo: DPA

Israel is seeking to buy three more advanced submarines from Germany at a combined price of €1.2 billion, an Israeli newspaper reported Friday.

Here’s where people live the longest in Germany
Photo: DPA

Germans down south seem to know the secret to a long life.

More Germans identify as LGBT than in rest of Europe
Photo: DPA

The percentage of the German population which identifies as lesbian, gay, bisexual or transgender is higher than anywhere else in Europe, according to a new study.

'Reichsbürger' pair attack police in Saxony-Anhalt
File photo: DPA.

A "Reichsbürger" and his wife attacked police officers on Thursday, just a day after another Reichsbürger fatally shot an officer in Bavaria.

Five things not to miss at the Frankfurt Book Fair
Photo: DPA

From consulting a book doctor to immersing yourself in an author's world with the help of virtual reality, here are five things not to miss at this week's Frankfurt Book Fair, the world's largest publishing event.

Sponsored Article
How to vote absentee from abroad in the US elections
10 things you never knew about socialist East Germany
Sponsored Article
Last chance to vote absentee in the US elections
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
Sponsored Article
How to vote absentee from abroad in the US elections
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
Eleven famous Germans with surnames that'll make your sides split
The best ways to get a visa as an American in Germany
jobs available
Toytown Germany
Germany's English-speaking crowd