"An ambitious programme"

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Economic stimulus package "An ambitious programme"

Cuts in value added tax, assistance for local authorities, a financial allowance for families, and steps to promote the technologies of the future: The coalition government has agreed on an extensive package of measures worth 130 billion euros to revive the economy and equip Germany for the future.

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Das Bild zeigt die Spitzen der Regierungskoaltion bei der Pressekonferenz im Kanzleramt

Chancellor Angela Merkel and members of the coalition government presented numerous measures to revitalise the economy.

Photo: Bundesregierung/Kugler

In view of the consequences of the coronavirus pandemic, a courageous response is needed, stressed Chancellor Angela Merkel when she presented the economic stimulus and future technologies package. It is about securing jobs and getting the economy back on its feet, she said. The measures agreed are worth a total of 130 billion euros. The aim, explained the Chancellor, is to emerge strongly and together from this "extremely difficult situation". The first foundation stone has now been laid. 

The package is geared to climate change mitigation and to promoting the technologies that will be important in future, alongside social-policy components. "It is an ambitious programme," declared Angela Merkel. The key elements are a cut in value added tax, and support for families, the private sector and local authorities.

"We want to hit the ground running as we come out of this crisis," said Federal Finance Minister Olaf Scholz, commenting on the package that the government will now be implementing. The package is to stimulate consumer spending, while also launching structural changes that will carry on well into the decade.

These are some of the main points hammered out by the coalition government:

  • A cut in value added tax (VAT): From 1 July to 31 December 2020, VAT is to be reduced from 19% to 16%, while the reduced rate will be cut from 7% to 5%. This should stimulate private consumption and is socially equitable, because VAT is a tax that everybody has to pay, said the Chancellor.
  • Per-child allowance for families: Parents will receive a one-off payment of 300 euros per child. The tax-free allowance will be doubled for single parents.
  • Support for local authorities: Federal government will increase the share it pays of the costs of accommodation for people in need, will compensate half of the drop in company tax levied by local authorities, and will strengthen both public transport and the health sector.
  • Reduction in electricity costs: As of 2021 the Renewable Energies Act levy on electricity is to be reduced through subsidies from the national budget.
  • Package for the future: A total of 50 billion euros under the programme is earmarked for a package for the future with tax breaks for research into the development of quantum computing and artificial intelligence. Stepping up the use of hydrogen power and better promoting electric vehicles are also part of the package.