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Germany

German Government Approves Multi-Billion Investment Program

Germany's government of Christian and Social Democrats has sent out a signal of industriousness by approving a 25-billion-euro ($30.2-billion) growth and investment package to take effect this year.

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Cabinet ministers discuss Germany's future near Berlin

The state-funded shot in the arm for the ailing German economy is meant to boost consumer confidence and create new jobs. But the program comes at the cost of fresh borrowing and a value-added tax hike in 2007 which may nip in the bud any temporary upswing.

At their two-day strategy meeting at a castle near Berlin, Chancellor Angela Merkel's cabinet ministers as well as other Christian and Social Democrat leaders approved a 25-billion-euro spending program which they sold as just the right tool to kick-start the sluggish economy.

While details on how much would be spent and on what remained undisclosed on Monday, the allocated money is certain to go into research and infrastructure projects. It'll also be used to ensure favorable tax treatment for capital investment and housing to provide incentives particularly to the country's small and medium-sized enterprises.

Private investment incentive

"We're first and foremost talking about incentives for more growth and employment," said Labor Minister and Vice Chancellor Franz Müntefering. "The 25 billion euros from the state will only be half of the equation with the ensuing increase in private investment being equally important."

Ursula von der Leyen

Ursula von der Leyen

Christian Democrat family minister Ursula von der Leyen said she is glad that part of the money will also go into more support for young families.

"It's our aim to give families with small children a better deal," she said. "The parents concerned are usually only at the beginning of their careers and tend to have relatively small incomes. At the same time, they face higher costs in bringing up their kids. So it's only fair to offer them some sort of financial compensation."

Opposition calls program "ridiculous"

Opposition Liberal Democrat leader Guido Westerwelle however countered that the harmony radiating from the government's meeting is ridiculous if one looks at the expected impact of the spending program.

Die Chemie zwischen Westerwelle und Merkel stimmt

FDP leader Guido Westerwelle wanted to join Merkel in a center-right coalition government

"This growth and investment program is a flash in the pan," he said. "It's based on fresh borrowing and won't have a long-term impact, because it doesn't really address any of this country's structural deficits."

Opposition Greens leader Claudia Roth doesn't think much of the program, either.

"It doesn't strike me as very logical that the government should now lay on a massive investment program, while it'll raise value-added tax next year with a view to getting the money back from people immediately," she said.

No other breakthroughs

Bundesregierung Klausurtagung Schloss Genshagen

Late night talks didn't lead to any other decisions

The government's strategy meeting, which ends on Tuesday, is not expected to result in breakthroughs in a number of other policy fields.

Christian and Social Democrat ministers said on Monday that a long-term plan for the country's energy policy and the future use of nuclear power in particular would only be adopted at a summit meeting in the spring. There won't be any tangible progress either towards a compromise on long overdue health service reforms.

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