Parliament votes to endhomebuyer scheme

22nd October 2004, Comments 0 comments

22 October 2004, BERLIN – Chancellor Gerhard Schroeder's Social Democrat-led government pushed through the lower house of parliament Friday a law bringing to an end a EUR 4.46 billion scheme providing subsidies for homebuyers.

22 October 2004

BERLIN – Chancellor Gerhard Schroeder's Social Democrat-led government pushed through the lower house of parliament Friday a law bringing to an end a EUR 4.46 billion scheme providing subsidies for homebuyers.

The move forms part of an effort by Berlin to knock the government's finances into shape and to head off breaching for a fourth time next year the strict budget rules for euro member states and to redirect resources and public investment towards areas such as research, technology and innovation.

But in securing final parliamentary approval for the law to eliminate the subsidy Berlin has to win the support of the opposition-controlled upper house of parliament (the Bundesrat) with members of the Christian Democrat-led opposition having already indicated that they do not support the government's measure.

"We have to abolish outdated subsidies such as the payments to homebuyers and put the money released into investments in the future, in strengthening research, technology and innovation," said Finance Minister Hans Eichel.

However, opposition members say that the subsidy helps to encourage Germans to own their own home and also underpins efforts in the country towards pulling back from the state pension system and promoting private pensions.

Germany's recession-hit building industry has also attacked the government plan, which would bring the subsidy to an end in January next year, saying it would reduce the number of houses built and result in a further big cut in jobs in the construction industry. Under the government's law, existing payments of the subsidy would continue to be made.

But the government argues that the handouts for homeowners are not necessary as Germany does not suffer from a housing shortage and that the population is set to shrink.

Under the present scheme, a married couple can claim one percent of the cost of buying or building a house or apartment for their own use each year for eight years.

The problem for the government is that Eichel has already included the subsidy's elimination in his calculations for next year's budget deficit.

Faced with a weak economy, falling tax revenue and the high cost of unemployment, the government has been battling to avoid the embarrassment of chalking another deficit next year which overshoots the three percent deficit requirement for members of Europe's common currency.

[Copyright Expatica News 2004]

Subject: German news

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