German state subsidies under fire

Even in the years of a moderate economic upswing, the German state continued granting generous subsidies, the Kiel Institute for the World Economy (IfW) said in its latest report out Monday.

The think tank said state authorities approved a record 168.7 billion euros ($179.3 billion) in subsidies last year alone, 2 billion euros more than in 2010 when the global financial crisis was peaking.

"Such a policy narrows the financial leeway of the state in addressing the most burning challenges such as the integration of migrants, infrastructure improvements and more security," the institute said in a statement.

Main beneficiaries

According to IfW calculations, 25.2 billion euros in subsidies paid out in 2015 went to the transportation sector, from national rail to rapid transit to e-cars. Subsidies for child care centers made up the second-largest item at 22.2 billion euros.

While total subsidies were on the rise again last year, some sectors have seen a considerable reduction in financial aid in recent years, among them agriculture and forestry, mining and housing.

The IfW survey pointed out that total subsidies looked set to hit a new high in 2016. "For most of those subsidies, there always seems to be a plausible reason, at least on paper," the study's co-authors, Claus-Friedrich Laaser and Astrid Rosenschon, said in a statement.

"But let's not forget that subsidies almost invariably mean a selective interference by the state in the workings of an otherwise demand-and-supply-driven market economy."

hg/sgb (dpa, Reuters)