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Germany

German Leaders Debate Economy-Boosting Measures

Cash-in-hand or infrastructure investment? Germany's economic stimulus package hasn't even been voted on, but politicians are already bickering over what comes next.

A growing plant

How best to grow the economy? German leaders are debating the topic

A proposal by the Social Democrats to issue consumer vouchers in a bid to spark spending has met with serious resistance -- not only from the SPD's ruling coalition partner the Christian Democratic Union, but from within Social Democratic ranks, and even the business community.

CDU parliamentary party chief Volker Kauder

CDU's Kauder: vouchers are short-term solutions

CDU parliamentary party chief Volker Kauder told German television on Wednesday, Dec. 3, that vouchers represent a short-term solution, and would most likely send money out of Germany anyway -- to overseas manufacturers.

Agreement still far off

Moreover Germany's states oppose the federal government on the economic proposals. They want to pay less for the package, and have demanded that the upper house of Germany's parliament, the Bundesrat, take action on their behalf. The assembly may even need to call on the Arbitration Commission during its debate.

Plans for a stimulus package and any further decisions are first expected to be agreed on Dec. 19. The debate taking place on Dec. 4 is largely political; the parliament is meeting to discuss how best to help families and to agree up on the latest stimulus package.

Representatives from the left wing of the SPD, like party vice-chairwoman Andrea Nahles, Saarland party chief Heiko Maas and parliamentarian Karl Lauterbach, stand behind the shopping checks. Lauterbach has suggested adults get a voucher for 500 euros ($630), to be spent within eight weeks on goods or services; consumers would be required to spend 200 euros additionally. Top German economic advisor Peter Bofinger suggests 125 euros.

Check proposal meets resistance

Nahles told the Passauer Neuen Presse newspaper that consumer vouchers would be an important step for boosting the economy next year. "We have to ask ourselves whether we aren't helping to prolong the crisis by waiting too long," she told the paper.

SPD Vice Chairman Andrea Nahles

SPD's Nahles wants to put money in pocketbooks

But Labor Minister Olaf Scholz and previous Finance Minister Hans Eichel, both from the SPD, warned that Germany should be careful about how best to boost the economy. Eichel told the Hamburger Abendblatt newspaper that its not the right time to throw cash at consumers.

Meanwhile, the premier of the state of Hesse, Roland Koch, rejected the check idea as well. Christmas spending this year has already showed an improvement over last year, he noted, saying it would be "crazy, negligent and wrong" to start a debate over state-sponsored consumer checks.

And retailers have said they see checks as more of a short term solution where long-term thinking is needed.

Call for infrastructure investment

In contrast, some CDU and SPD representatives are calling for infrastructure investments to help the nation to dig itself out of an economic hole.

Bavarian Prime Minister Horst Seehofer

Bavarian PM Seehover sees salvation in tax breaks

Infrastructure investment is better than either consumer checks or tax breaks since it brings jobs to the country, the CDU's Kauder pointed out. He is supported by a host of state prime ministers. Meanwhile, Bavarian premier Horst Seehofer told German television on Wednesday that he thinks the best way forward is via tax breaks.

An economic summit is slated to take place on January 5, 2009. However, it seems unlikely that any decision will actually be made by then. According to news reports, the parties have already struck an agreement not to pass any costly measures at that meeting.

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