Calls Mount in Germany for State Aid to Industry | Germany| News and in-depth reporting from Berlin and beyond | DW | 06.12.2008
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Calls Mount in Germany for State Aid to Industry

Calls mounted in Germany Saturday, Dec 6 for the government to come to the aid of industry as the nation battens down for what may be its worst downturn for 15 years.


Germans are edging towards depression as the country's recession starts to bite

Chancellor Angela Merkel has rejected calls for the federal government to increase borrowing and give Germans more to spend. One proposal this week had called for Germans to be given 500-euro ($630) vouchers to spend on slow-selling products.

The news magazine Der Spiegel quoted the chief executive of Adidas, Herbert Hainer, calling for the German retail sales tax to be temporarily reduced to 16 percent. Currently this value-added tax is at 19 percent.

At car company Volkswagen, chief executive Martin Winterkorn demanded action, telling Der Spiegel it was "an absolutely exceptional situation where the normal political and economic instruments won't help."

Porsche chief financial officer Holger Haerter said retail demand in Germany was down so far that the state could no longer avoid paying.

"If it doesn't spend money on economic stimulus now, it will have to spend even more later on ameliorating the social effects of the crisis," he was quoted saying.

Industry chiefs call for government help

Ortsschild Rezession

Industry chiefs are panicking and want action

Another news weekly, Focus, quoted BMW's new chief financial officer Friedrich Eichiner calling for government guarantees for the companies that supply components to the reeling car industry.

"In such a bad crisis, the state has to come to their aid," said Eichiner, saying he understood some of them were in deep trouble. He said the car manufacturers were not strong enough to lend them money.

He blamed a shortage of loans from the banks. This was confirmed by the chief executive of one such supplier, ZF Friedrichshafen. Hans-Georg Haerter charged that the banks were withholding credit.

"They are obtaining restructuring for themselves with taxpayer money instead of getting on with their job of letting their customers obtain money in the form of credit," he said in remarks reported by Der Spiegel.

Another CEO, Franz Fehrenbach of Bosch, said, "It's irresponsible when companies that are fundamentally sound are driven to the wall because they can't refinance any more."

On Friday, the Bundesbank central bank said Germany was heading into a deep recession next year which would be the worst since 1993, with the economy shrinking 0.8 percent.

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