More money for families and municipalities, relief on the price of electricity and a reduction in VAT: With a huge stimulus package, the black-red coalition wants to boost the economy in the Corona crisis. The Union and the SPD are also aiming for a “modernization boost” and want to promote future technologies for more climate protection. Coalition leaders had long wrestled with the program.
The recovery package is expected to reach a level of 130 billion euros Have. The federal government must take over 120 billion of this, as Chancellor Angela Merkel (CDU) said in Berlin on Wednesday evening. The aim is to boost the economy and the consumption of citizens. As a result of the Corona crisis, the worst recession in German post-war history is expected.
Merkel spoke of a good result. It is a question of dealing with the most serious economic crisis. This can be seen in the more than seven million short-time workers. All of this needs a courageous response. Vice-Chancellor Olaf Scholz (SPD) summed it up with the words: “We want to get out of the crisis with wumms.”
The key points of the agreement are:
- According to CSU Chairman Markus Söder, the “heart” of the package is a Reducing VAT. From 1 July to 31 December 2020, the VAT rate will be reduced from 19 per cent to 16 per cent and for the reduced rate from 7 per cent to 5 per cent.
- The leaders of the grand coalition decided against this against a purchase premium for low-emission petrol and diesel cars. However, they decided to significantly higher premiums for electric cars. The SPD, in particular, had vehemently opposed premiums for gasoline and diesel. Söder from the car manufacturer’s country of Bavaria now said that by reducing VAT for all engines and classes and price categories, not only the manufacturers but also the trade unions could live well.
- In the case of Electricity citizens should be relieved. For this purpose, the EEG levy for the promotion of green electricity plants is to be reduced by 6 percent from 2021 onwards, initially by 6 percent, and by 6.5 percent the following year.
- The leaders of the Union and the SPD also agreed on a Children’s bonus of a one-time payment of EUR 300 per child to be paid with the child benefit. However, he will be charged the child allowance for the tax return. In addition, the daycare centres are to be further expanded.
- The financially hard-hit Municipalities billions in federal aid are also available. The aim is to compensate for the losses in business tax revenues for 2020 and 2021 by the federal and state governments together. SPD leader Norbert Walter-Borjans said the enormous relief would make municipalities eligible for investment. In addition, the federal government wants to take on more of the aid for Hartz IV recipients on a pro rata basis.
- The railway is to receive support due to loss of revenue in the Corona crisis: a grant of EUR 5 billion is planned to increase equity capital. It also plans to spend EUR 2.5 billion on local public transport.
- Coalition leaders also agreed on billions of dollars in additional support for industries particularly burdened by the Corona crisis. Planned are “Bridging aids” a maximum of EUR 25 billion, according to a decision paper. The aim is to prevent a wave of bankruptcies in small and medium-sized enterprises, such as hotels, restaurants and travel agencies.
- In addition, it is intended to Tax relief liquidity of firms and have scope for investment.
- The Coalition also wants more money for research into artificial intelligence and Expansion of the new, fast mobile phone standard 5G Spend. Digital change is also to be promoted in public administration. The aim of the coalition partners is to quickly put Germany back on a sustainable growth path that secures jobs and prosperity, the decision paper states.
- The black-red coalition also wants to Germany’s forests and the timber industry with an additional EUR 700 million. The money should be used for afforestation, conservation and sustainable management of forests. After two years of drought, 2020 had also started dry, and timber prices had fallen sharply, partly because of the Corona pandemic. Last autumn, the Federal Government and the Länder had already announced EUR 800 million in emergency aid for forests.
Federal government must make new debts
After the short-term aid in the Corona crisis – for example through special loan programmes via the state bank KfW – the planned economic aid in some cases extends far beyond the current legislative period. Eighty proposals were on the table at the beginning, with 57 remaining. It was clear that not all wishes would be financially viable, especially as tax revenues are falling because of the Corona crisis and unemployment is rising again.
To cover expenses, the federal government must take on new debt. Finance Minister Scholz (SPD) spoke of a supplementary budget, without specifying the scope. According to CSU leader Markus Söder, this does not in any way lead to over-indebtedness of the country, nor does it lead to the state being incapacitated or overburdened by the next generation. The package also had something to do with psychology, it was about spreading optimism.
After negotiating for nine hours on Tuesday, the leaders of the CDU, CSU and SPD sat together again on Wednesday for about twelve hours. The coalition partners withdrew several times for separate deliberations. According to SPD leader Walter-Borjans, there was a great deal of agreement on the content of the broad lines, but there was a great need to wrestle with each other in details.