Merkel: German fiscal plan to strengthen country
By MELISSA EDDY
Associated Press Writer
BERLIN (AP) – German Chancellor Angela Merkel said Tuesday her government’s new euro50 billion ($67 billion) financial stimulus plan is an “exceptional” measure to help the country weather the financial crisis by combining tax relief with public spending.
Merkel told reporters the package agreed upon late Monday by top lawmakers in her coalition government was aimed at combatting the effects of the global financial crisis.
She said the package “makes clear the size and dimension of the international crisis, but also the will of the government to overcome this crisis.”
“We will do everything possible so that Germany does not just overcome this crisis, but so that Germany emerges from it stronger.”
Economic Minister Peer Steinbrueck told reporters earlier that the package would by 2010 send the German budget above the 3 percent threshold agreed to by countries using the common euro currency.
But Merkel said that “when faced with an extraordinary situation, then I am convinced that we have to respond withextraordinary measures.”
She added that specifics on how to fund the package were still being hashed out, but that it would most likely come through a special fund within the economic ministry, similar to the one set up in 1995 to help pay for German reunification.
The new package will run through 2010. Coming on top of an earlier plan worth euro23 billion passed last month – criticized at home and abroad as too cautious – the new measures amount to one of the largest stimulus plans so far in Europe.
The head of a group of German economic advisers to the government, Bert Ruerup, praised the package as a “reasonable compromise” and expressed hope it would help turn around the economy.
“This package will not prevent the recession, but will mitigate it,” he said. “When these measures take effect, I expect them to have a positive effect of about 0.5 percent growth.”
The German economy went into recession in last year’s third quarter and is widely expected to shrink this year.
Merkel said some euro18 billion had been earmarked for investment in infrastructure, with a quarter of that pledged to improve the structure of schools and university buildings.
Funds have also been put aside for expanding broadband Internet connections, particularly in more rural areas of Germany.
Another element includes some euro100 billion in possible credit guarantees aimed at small and mid-sized firms – an effort to counter charges the government has concentrated so far only on bailing out large companies such as carmakers and commercial banks.
Securing jobs is a key element of the package, Merkel said.
“Keeping people in work … is the yardstick on which we have built this package.”
In an effort to help Germany’s auto industry and encourage more efficient vehicles on the road, the package also will give euro2,500 toward the purchase of a new car to anyone who agrees to junk their existing one if it is more than 9-years-old.
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