Germany: throwing billions at the rececession

Germany's grand coalition has agreed to an economic stimulus programme worth 130 billion euros. It lays out 57 points, among them lowering VAT, a 300 euro child bonus, a cap on non-wage labour costs, a buyer's premium on electric cars and further support for businesses and municipalities. The measures provoke controversy among commentators.

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Financial Times (GB) /

Role model for other EU states

Germany is showing the rest of Europe how to shore up their own economies, the Financial Times comments approvingly:

“The stimulus is big - worth nearly 4 per cent of gross domestic product - and well-designed. ... Berlin is doing more to cushion its economy than most other large European economies, even though its contraction is likely to be less severe than elsewhere. After years of parsimony, it has plenty of scope to spend. Its neighbours should now feel encouraged to come up with their own well-calibrated stimulus plans. An EU recovery fund, once approved, will give them some support.”

Helsingin Sanomat (FI) /

Money goes directly to consumers

Germany is taking a cleverer approach than Finland, comments Helsingin Sanomat:

“In its supplementary budget the Finnish government has earmarked a lot of money for projects that will take some time to get going. Infrastructural measures are necessary but they will not boost the economy for several years, if at all. The remaining money for schools and teachers certainly makes sense as it will improve skills in the long term, but it will have very little economic impact when it is most needed, which is now. ... In Germany the focus is elsewhere. ... VAT has been lowered until the end of the year. And families with children are being given 300 euros per child. ... Germany is handing the money directly to consumers.”

Neue Zürcher Zeitung (CH) /

Lack of spending power is not the problem

The Neue Zürcher Zeitung has its doubts that lowering VAT will do much to stimulate buying:

“First off, the coalition politicians are assuming that businesses will pass on the tax cut to consumers. This might happen in highly competitive sectors but it is certainly not guaranteed. Secondly, even if it is passed on, we don't know if people will consume more or just put it towards their savings. ... Economists have pointed out that consumers stopped spending primarily due to anxiety about the future and corona-related restrictions rather than a lack of spending power.”