German’s lower house approves historic stimulus plan

13th February 2009, Comments 0 comments

Merkel's uneasy right-left "grand coalition" cobbled together the package last month after its first effort drew criticism for being too small.

Berlin -- The German lower house approved on Friday Chancellor Angela Merkel's 50 billion euro (64 billion dollar) stimulus package aimed at lifting Europe's biggest economy out of its worst postwar recession.

Merkel's uneasy right-left "grand coalition" cobbled together the package last month after its first 31 billion euro effort last year drew criticism at home and abroad for being too small.

The raft of measures is Germany's largest stimulus plan since World War II and includes a huge increase in infrastructure spending as well as sweeping cuts in tax and social security contributions.

Official data released Friday showed that the German economy contracted by 2.1 percent in the final quarter of 2008, the biggest slump since East and West Germany unified in 1990.

The world's biggest exporter, buffeted by slumping demand for its goods abroad and weak domestic consumer spending, entered recession in the third quarter of 2008 after two successive three-month periods of negative growth.

The stimulus plan forces Germany to take on a huge amount of new debt and Finance Minister Peer Steinbrueck has acknowledged his country will next year break EU budget deficit rules.

The package now goes from the Bundestag to the upper house, the Bundesrat, which is due vote on it on February 20. Merkel's government has forecast the economy will shrink by 2.25 percent in 2009.

AFP/Expatica

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