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Germany's Stimulus Package Convinces Some, Not All Experts

German Chancellor Merkel's coalition has unveiled a 50-billion-euro stimulus package meant to boost growth and protect jobs in Europe's biggest economy. But not all experts are convinced it can help beat the downturn.

German Chancellor Merkel and Foreign Minister Steinmeier

Merkel and Steinmeier say no country is doing more than Germany to boost its economy

Germany's Conservative Chancellor Angela Merkel was full of praise for the initiative, being touted as a "pact for Germany," which her coalition passed on Tuesday, January 11.

Merkel told reporters her government was doing "everything possible so that Germany does not just overcome this crisis, but emerges from it stronger."

Foreign Minister Frank-Walter Steinmeier from Merkel's junior coalition partner, the Social Democrats, said the German package of investments, government loans and hand-outs, and tax cuts, compared favorably with stimulus measures taken by other nations.

"When I look around Europe, I can't see anyone else doing more or taking better steps than we are," he told reporters.

The package has come after mounting criticism that the government was being too hesitant in combating the economic decline prompted by the global financial crisis.

Soon enough


"Konjunktur" is German for "economic growth," but not everyone likes this package

But leading private-sector economists in Germany disagreed about whether the so-called pact was all government ministers were claiming.

The chief economist of Commerzbank, Joerg Kraemer, was impressed.

"No economic program in the world can stave off a recession, but the measures will no doubt contribute to stabilizing the economy in the second half of the year," he told DPA news agency.

The head economist at the Bank of America, Holger Schmieding, has a different assessment.

"This may only kick in late this year and thus do nothing to help us when the recession is at its worst -- over the current quarter and the nest," Schmieding told Reuters news agency.

But others thought that the likely length of the slump would give the package time to work.

"The economic downturn will last so long that the full effect of the stimulus measures are bound to be felt," BHF bank chief economist Uwe Angenendt told DPA, and Deka Bank chief economist also offered that agency pretty much the same analysis.

Debts and more debts

Snowed-under cars

German car sales are currently in a deep freeze

The Association of German Taxpayers is considerable less happy with the package, which will run up the federal deficit.

In an official statement, Association President Karl Heinz Daeke called the measures a "smokescreen to distract from [the absence of] true tax relief."

While greeting the 18 billion euros of investment foreseen in the package, Daeke called for increased vigilance to ensure that the money wasn't wasted.

He criticized the government premium of 2,500 euros to be paid to people who scrap their old cars and buy new ones, saying the auto industry would have benefited more from direct tax cuts.

And he reminded Germans that the program would come at a high cost.

"Every taxpayer should be aware that this stimulus package is being financed with debts which the community of tax payers will have to pay off in the future," Daeke said.

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