BERLIN—After more than 20 hours of negotiations, German Chancellor Angela Merkel and her coalition partners unveiled on Wednesday night a major stimulus package aiming to boost the German economy suffering under the worst recession since 1945.
“It is an ambitious plan but not one that risks getting out of hand,” said Merkel at the press conference following the talks.
The package boasts 130 billion euros ($146 billion) and 57 measures in 3 areas.
Many of them focus on boosting consumption. Value added tax will be lowered for 6 months from 19 to 16 percent, families will receive 300 euros per child, and electricity prices will go down.
But not everyone is convinced these are the right answers to the problem.
“Private consumption is down because of the shutdown measures, because people are still feeling uncomfortable to go shopping and therefore extra income will not overcome this problem,” said Stefan Kooths, head of forecasting at the Kiel Institute, an economic research institute based in Kiel, Germany.
This is Germany’s second stimulus program during this crisis. The government’s support now stands at almost 1.3 trillion euros ($1.46 trillion). Its March stimulus, as a share of GDP, was already the world’s largest, far outpacing all other European nations, according to The Wall Street Journal.
Some officials from economically weaker countries in the European Union, like Italy, are concerned. Germany’s generous spending could worsen imbalances in the bloc.
But that might not be the case.
“Stabilizing the German economy is also part of stabilizing the European Union as a whole. Other countries will benefit to some extent,” said Kooths.
The stimulus program also includes expanded incentives for purchasing electric cars, and financial help to local governments struggling with lower tax receipts.