German Industry Calls for Increased Government Investment | Business| Economy and finance news from a German perspective | DW | 16.10.2008
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German Industry Calls for Increased Government Investment

With the credit crunch and a pending recession, governments don't have much money to throw around. According to German industry groups, Berlin can't afford not to toss a little cash their way.

Steel worker working on a piece of metal with sparks flying off it.

German industries are calling on the government to help them ride out the crisis

The president of the German national industrial federation BDI, Juergen Thumann, has demanded more government investments to help alleviate the problems caused by the financial crisis.

“The federal government should in no way reduce the amount of their investments, in fact they should increase them,” Thumann was quoted as saying in the German daily Der Tagesspiegel.

Thumann said infrastructure projects should be renewed, especially in conjunction with private companies.

“I’m thinking of building roads, airports and power plants. There are more than enough projects,” he added.

The BDI chief also encouraged the government to continue trying to balance the budget, even if it isn’t possible to do it in the next few years. Originally Berlin had set a goal of 2011, but in the face of the international financial crisis and the billions of euros being pumped into rescue packages, that now seems like a long shot.

Experts call for stimulus package

Thomas Straubhaar

Straubhaar is in favor of a stimulus package

Meanwhile the head of the Hamburg World Economics Institute (HWWI), Thomas Straubhaar, said that the government should give the people money to help stimulate the economy.

“Every taxpayer should get a check from the government before the end of this year,” he was quoted as saying in the German daily Hamburger Abendblatt.

Straubhaar suggested that each tax paying adult receive 100 euros ($134) in November and 100 euros in December.

“Everyone should get the same amount. That's because it isn’t just doing something for the people, but for the economy as well,” he added.

In spite of increasingly gloomy forecasts for the European economy, leaders have no plans for launching a concerted EU stimulus plan to boost activity, said Luxembourg Prime Minister Jean-Claude Juncker.

"Who would pay for it and with what money?" said Juncker, who also chairs the Eurogroup of eurozone finance ministers. "I don't see how we could finance such a big stimulus plan."

Germany on the brink of recession

Street sign with recession written on it in German.

Some experts have said Germany is headed for a recession

This comes on the heels of an announcement by the German government that the country is on the verge of a recession, due to the financial crisis and the struggling world economy.

The ongoing economic downturn led the government to lower the 2009 growth forecast in Europe's biggest economy from 1.2 percent down to 0.2 percent.

But Economy Minister Michael Glos said in Berlin that there is no need to panic. For the current year, the minister is still expecting gross domestic product (GDP) growth of 1.7 percent. Though that number is also down from 2.5 percent.

"We are just seeing some slowdown in the economy," Glos said. "There is nothing to sugarcoat or cover up."

Too early to foresee crisis' outcome

Michael Glos

Glos said Germany should reform its tax system

Glos insisted that his latest forecasts entailed a "high degree of uncertainty" as it was still too early to predict exactly how the current financial crisis would affect the real economy.

Glos went on to say that the financial firestorm that swept through markets in recent weeks underscored the need for Germany to overhaul its tax system.

"Beyond what we've already agreed, there is an urgent need for tax relief," said Glos.

According to government forecasts, the economic slowdown will also leave its mark on the German labor market, where unemployment has been shrinking for more than two years.

Glos predicted that the jobless total will average an annual 3.3 million next year, the same level as this year.

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