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Business

German Parliament Okays Stimulus Package as Industry Reels

Germany's parliament signed off on an economic stimulus package for the nation Friday, but critics say it does not go far enough in solving the country's financial woes.

An emergency telephone is seen in front of the bank towers in Frankfurt

Critics say the stimulus package isn't comprehensive enough

The deal, worth 23 billion euros ($29 billion), grants tax breaks on new cars and includes credit assistance for companies in trouble as a result of the economic slowdown.

The approval of the plan will be greeted as good news by carmakers, which have seen overall output and sales drop dramatically in recent months as consumers tighten their purse strings.

But critics say Chancellor Angela Merkel's government has not gone far enough with the package.

Pressure has mounted on Merkel to allow cuts to value-added tax, as has been done in the UK, in an effort to motivate consumers into spending more.

But Merkel said this week that the German government "will not join in a multibillion (euro) race simply to create the impression that we have done something."

The government said the package would generate an additional 50 billion euros in investment for Germany.

Industry creaks

As the packaged was cleared by the upper house of parliament Friday, Dec. 5, data released the same day showed that factory orders across Germany have plunged.

With a grim roll call of economic indicators from around the world pointing to a global recession taking hold, the data showed domestic industrial orders fell by 6.1 percent in October, while foreign orders fell by 6.2 percent.

Mini Coopers parked in a dealership

Car sales are down across the board in Germany

"All industrial groups reported lower orders in October compared to the previous month," the Ministry for Economics and Technology said, releasing the latest order book data.

Also Friday, the Bundesbank said Germany -- the world's leading export nation -- could expect further export falls of 0.5 percent in 2009.

Credit harder to come by

Up until recently there had been signs that German businesses had managed to avoid the credit squeeze unleashed by the US subprime mortgage market crisis.

But a survey released by the German Ifo economics institute Friday pointed to companies facing growing problems in arranging financing amid the deepening sense of gloom about the economic outlook.

About one third of the 4,000 companies responding to the survey reported a growing reluctance on the part of banks to lend money, Ifo chief Hans-Werner Sinn said releasing the survey.

"In particular, large companies have been complaining that credit lines are restrictive," said Sinn.

But Sinn said he did not believe German companies were facing a credit squeeze, rather he said he saw higher hurdles to arranging credit.

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