The federal German government has agreed a EUR 130 billion collection of tax breaks, subsidies and other financial aid to rev up the German economy as it emerges from the coronavirus lockdown.
The package of measures – the result of almost 21 hours of negotiations within Germany governing conservative-Social Democratic coalition – comes on top of other already approved government assistance programs.
“Up until now, Germany’s response has been directed at helping companies large and small weather the economic storm with government grants and emergency lines of credit,” says Germany Trade and Invest (GTAI) Chairman and CEO Jürgen Friedrich. “The stimulus package is aimed at priming the German economy in general so that lasting recovery can take place. It also sets some future priorities for the German government.”
One main focus is encouraging consumer spending. At a cost of around EUR 20 billion, Germany will lower its value-added tax from 19 to 16 percent from July 1 to the end of this year. Families will receive a one-off “bonus” of EUR 300 for each child. And the government is lowering electricity costs by capping surcharges under the German Renewable Energy Sources Act or EEG.
Some of the stimulus is aimed specifically at encouraging Germany’s transition to electro-mobility. The basic government subsidy for the purchase of a new electric vehicle with a list price below EUR 40,000 is being doubled from EUR 3000 to 6000. The state will help underwrite carmakers’ costs in transitioning to the new technology and has pledged an additional EUR 2.5 billion for EV charging infrastructure and battery-cell research. Germany rail company Deutsche Bahn will also receive EUR 5 billion in financial aid, and local public transportation providers EUR 2.5 billion.
EUR 25 billion have been earmarked for sectors particularly hard hit by coronavirus restrictions, including hotels and restaurants, clubs and bars and travel agencies. They will be eligible for government aid to meet operating costs of up to EUR 150,000 for three months. More generally, social-insurance contributions for employers and employees are to be capped at 40 percent.