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Stimulus Plan

DW staff (jam)December 24, 2008

German papers reported on Wednesday, Dec. 24, that Berlin is planning a package of measures to help the country fight recession worth 25 billion euros ($35 billion), less than the 40 billion euros reported earlier.

construction cranes
The stimulus package might not have as much for infrastructure projects as once thoughtImage: AP

The Sueddeutsche Zeitung and the Frankfurter Rundschau have both reported in their Wednesday editions that the 25-billion-euro plan came out of a meeting on Tuesday between Chancellor Angela Merkel's chief of staff and representatives from Germany's 16 federal states.

The volume is less than expected. German newsmagazine Der Spiegel had earlier reported that a package worth up to 40 billion euros could emerge. But according to the Sueddeutsche, Germany is unwilling to spend more due its wish to adhere to strict EU deficit rules.

Citing unnamed government officials, the Sueddeutsche reported that some 10 billion would be used to reduce social security contributions and billions would also be made available for tax cuts. The paper quoted a government official as saying several billion would be made available for infrastructure projects.

Finance Minister Peer Steinbrueck has not confirmed the reported amount, saying everything still was being considered.

But Ingolf Deubel, finance minister of the western state of Rheinland-Palatinate, confirmed the figure of 25 billion euros in an interview with Germany's Rhein-Zeitung newspaper.

Deubel, who took part in the Tuesday meeting, said it was unclear how much would go to new investments.

Sticking to the rules

Germany sees itself as a guardian of the EU's Stability and Growth Pact, which puts strict limitations on deficits and debt, and doesn’t want to provide a pretext for countries such as France and Italy to soften the pact’s rules, the newspaper said.

EU rules limit deficits to three percent of GDP, or 75 billion euros in Germany's case.

containers at hamburg's harbor
Experts say a stimulus package is necessary to help Germany fight recession, but how much?Image: AP

The paper said the global economic storm has resulted in a 50-billion-euro deficit, which leaves 25 billion euros available for a second package.

Germany has already put in place a series of measures that Berlin says is worth 31 billion, but Angela Merkel and her government are under pressure to do more to help Germany withstand the worst of the financial crisis.

At Tuesday's meeting, officials from the federal states were asked to bring concrete proposals for projects that could be funded by the stimulus package to another discussion meeting on Jan. 5. Projects are likely to include such things as road construction, broadband Internet access and schools.

Some politicians have called for tax cuts to spur consumer spending, but Merkel has said reductions are off the table until September elections.

Some economists have warned that Germany could be facing its worst economic downturn since World War Two. The economy has already slipped into recession.