Germany Unveils Stimulus Plan

by Ulrika Lomas, Tax-News.com, Brussels

07 November 2008

In an attempt to limit the impact on the German economy of the forthcoming slowdown that has been widely predicted, the country's government has this week unveiled a stimulus package, costing an estimated EUR23bn.

The measures follow a recent bailout of the banking sector, and are aimed at stimulating investment over the coming years.

The package will include cheap state-guaranteed loans for businesses, additional cash for infrastructure investment, more flexibility for companies seeking to write-off the costs of investments for tax purposes, and various 'green' tax breaks, including incentives for the use of lower emission vehicles.

Although it is hoped that the government's action will be enough to increase investment by around EUR50bn in 2009 and 2010, it is thought unlikely that the sharp downturn predicted for next year can now be averted, a point already conceded by Chancellor Angela Merkel who has been the driving force behind the new measures.

However, the German authorities have been forced to admit that the stimulus package and the recent bank rescue effort have derailed plans for a balanced budget by 2011; the deadline for this has now been shifted to the end of the next Parliamentary term, in 2013.

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