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Berlin Outlines Proposals to Support German Industry

German Chancellor Angela Merkel confirmed government plans to boost the economy as a global recession looms. One proposal aims to support the struggling auto industry.

A van on a lift

Berlin plans to promote sales of cleaner cars

Addressing Germany's import-export federation BGA in Berlin on Wednesday, Oct. 29, Merkel said the package would include incentives for investment rather than being just a broad-based rise in government spending.

"It will be targeted, it will be courageous and above all it will be sustainable," Merkel said of the upcoming measures. "A quick flash in the pan cannot truly help our economy."

She also stepped up pressure for next month's G20 summit in Washington to agree on a brief for negotiations on financial-market regulation. Those world negotiations ought not to take longer than a year, she said.

To give direct help to small and medium-sized enterprises (SMEs), the German Economy Ministry set up a hotline for SMEs having problems with financing because of the international crisis.

A telephone

Business owners can call a finance ministry official during regular business hours

"We do not want to leave SMEs to fend for themselves in this situation, and we will offer support where it is possible," Economy Minister Michael Glos said in a statement.

Germany is to boost the ailing car industry by reducing its taxes on low-emission cars, Merkel's spokesman Ulrich Wilhelm said.

The vehicle-tax changes to be adopted by Merkel's Cabinet next week would be part of a program to boost the flagging economy.

The disclosure follows days of debate in Berlin about whether to increase government spending, cut taxes or both to ease the effects of an approaching slump.

Promoting cleaner cars

Wilhelm gave no details but said the package would be a "well-adjusted concept."

A car exhaust

The proposal would work to get heavily polluting cars off the road

The proposal was "concretely" planned to alter the scale of vehicle tax, so tax rates were no longer keyed to a vehicle's engine size but instead to the engine's level of emissions, Finance Ministry spokesman Torsten Albig said.

Environmentalists have pressed for the change, saying it will encourage owners of polluting cars to scrap them and thus help reduce carbon dioxide emissions blamed for global warming.

Senior German officials have said Berlin will also offer new soft loans and grants to improve building insulation, tax deductions for home-improvement work and changes in the amortization rule for taxes.

EU on board

EU Industry Commissioner Guenter Verheugen threw his weight Wednesday behind a call to give the bloc's carmakers cheap loans worth up to 40 billion euros to develop eco-friendly cars through the financial crisis.

"We are in a situation where it is getting harder for big European businesses to get credit," Verheugen said. "It is not a question of hand-outs, it's a question of the European Investment Bank making available a low-interest credit program."

The European carmakers association ACEA said the industry needed state help.

"In today's difficult operating environment ... the European automotive industry more than ever requires a stable and predictable policy framework to ensure competitiveness and employment," the organization said in a press release.

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