Germany agrees to a 130 billion euro package to boost the economy affected by the coronavirus pandemic.
Germany will put 130 billion euros into an economic stimulus package to revive an economy that was severely affected by the coronavirus pandemic, Chancellor Angela Merkel said late Wednesday.
As part of the far-reaching measures, outlined in a 15-page document, the value-added tax is to be lowered temporarily, families are to receive 300 euros per child, and the state discount on the purchase of electric cars is to be doubled to 6,000 euros.
“The size of the package will reach 130 billion euros for 2020 to 2021, of which 120 billion euros will be paid by the federal government,” Merkel said.
Referring to the short-time working of millions of employees in Germany, Merkel said: “This shows how fragile the whole thing is and why we have to succeed in giving the economy a boost so that jobs can be secured”.
“We must come out of this crisis with momentum,” said Finance Minister Olaf Scholz.
The new impetus comes in addition to a massive rescue package worth 1.1 trillion euros, which was agreed in March and includes loan guarantees, subsidies and an intensified short-time working programme to prevent job losses.
In order to finance the unprecedented package, the parliament had decided on a new debt, which marks a fundamental change in German economic policy and removes a constitutional provision from the time of the financial crisis that drastically limits budget deficits.
With borders being closed, workers staying at home and shops and restaurants having to close to stop the transmission of the coronavirus, Germany is heading for the worst recession in its post-war history.
Interruptions in trade and travel also weigh on the export metropolis.
Recent data released on Wednesday show that the unemployment rate rose to 6.3 percent in May, which is equivalent to about 2.8 million people, up from 5.8 percent in April.
In view of the sharp drop in new infections, Europe’s largest economy began to relax social restrictions in early May, allowing shops to reopen while restaurants and tourism companies take the first cautious steps.
Factories are also starting up their production lines again.
Merkel said the support program would “help the economy to get back on its feet and grow again”. In order to boost consumption, the value added tax is to be lowered from 19 to 16 percent from July 1 to December 31 this year.
A controversial plan for a scrappage bonus, which would also apply to petrol and diesel vehicles, has not come about after loud environmental protests.