Germany pumps billions into the economy at last

Germany pumps billions into the economy at last

18th January 2009, Comments 0 comments

The row between Germany on the one hand and France and Britain on the other was a bitter one.

Germany came under fire for dragging its feet and doing too little to ease the international economic crisis. But now the country is setting aside 50 billion euros to boost the economy. In a year that will see elections at every level in Germany, Chancellor Angela Merkel is trying to keep everyone happy.

"The same people who would never touch deficit spending are now tossing around billions," and "The fact that all lemmings have chosen the same path doesn't automatically mean that it's the right path."

Two quotes from German Finance Minister Peer Steinbrück last week. Germany was under heavy international pressure to do more to combat the international economic crisis. The country had presented a rescue plan for the banking sector and an investment programme for infrastructure, but this wasn't enough for its European neighbours.

Because of her negative attitude, Chancellor Merkel earned the nickname "Madame Non!". A low point in relations came when she failed to attend a crisis meeting in London at which British Prime Minister Gordon Brown, French President Nicolas Sarkozy and President of the European Commission Jose Manuel Barroso discussed emergency plans. It looked as if Germany was staying on the sidelines.

Made in Germany: the morning after

Until this week. Because the country is finally going to start dishing out the billions. It's taken time, but that's all to the good, says Angela Merkel.

"You only decide to make such an effort if you're entirely convinced of the depth of the crisis and have analysed the specific measures we have to take in Germany to emerge from it in a stronger position."

The government is planning to spend a total of 50 billion euros, with 18 billion going on direct state investment in projects ranging from repairing schools, universities and roads, to providing broadband internet in rural areas.

Scrap-heap premium
The rest of the money is earmarked for tax reductions and premiums for the German public. The income tax threshold will rise, every family with children will receive a one-off 100-euro bonus, and a "scrap-heap premium" will be introduced for cars. Anyone who gets rid of an old car and buys a new fuel-efficient model will receive 2,500 euros.

Frankfurt financial district"The crisis we are now facing is an international one. It was sparked off by excesses on the financial markets. We are curbing the excesses and combating their consequences."

The aim of the package is to protect employment. As an exporting country, Germany is suffering badly as demand falls worldwide. Export figures in the last quarter of 2008 were disastrous. Because of the global nature of the crisis, a real solution can only be found at international level. Mrs Merkel will therefore be meeting Gordon Brown on Thursday, and sees promise in President-Elect Barack Obama, whom she hopes will restore order in the financial world. But she also has a warning for the United States.

"Of course we can't sit by and watch for years while the US motor industry is kept running on taxpayers money, and we have to conclude that it leads to unfair competition for German car companies."

The German stimulus package will leave the country with new debts that will take years to pay off.

Laurens Boven
Radio Netherlands

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