The German government is taking on record amounts of debt for the economic stimulus package. The federal cabinet has now approved a second supplementary budget. What measures are planned – and how much money the federal government is spending on each of them.
As a "boom package is how Finance Minister Olaf Scholz describes the measures designed to get the economy moving again. The economic performance had collapsed by 6.3 percent as a result of the Corona crisis. – © picture alliance/dpa/Alexander Blum
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In light of the Corona crisis and a multi-billion dollar stimulus package, the federal government is taking With about 218 billion more debt this year than ever before. "Now we are spitting in the hands, we increase the gross national product", said German Finance Minister Olaf Scholz (SPD) after the cabinet meeting, referring to a well-known song line. Now is the right time to ensure that the economy picks up again with an economic stimulus package. "We are not saving against the crisis", he emphasized. Instead, he said, the German government intends to introduce a The second supplementary budget will add a further 62.5 billion euros in debt record.
Economic stimulus package to cost around 100 billion euros this year
The Ministry of Finance further announced that this second supplementary budget will mainly cover measures of the budget approved on 3. June 2020 economic stimulus package approved by the coalition committee, worth about 103 billion euros depicted. Overall, the first supplementary budget adopted in March brings new borrowing this year to 218.5 billion euros out of a total budget of 509 billion euros. The Bundestag still has to approve second supplementary budget with majority of all deputies.
Scholz: "Less would not be enough"
The German government justifies the unprecedented borrowing with the massive Slump in the economy, which it has set for this year 6.3 percent estimates. "Less would not be enough", Scholz said with regard to borrowing. The Finance Minister is hoping for a major boost to demand from a reduction in value-added tax, which will run from the beginning of July to the end of December 2020. General rate to drop from 19 to 16 percent, reduced rate from 7 to 5 percent. In addition, a one-time child supplement of 300 euros is planned. These two measures alone would lead to a total relief of around 24 billion euros.
Further bridging aid for companies firmly planned
For companies there would be Tax relief and Bridging aids in the form of subsidies for fixed costs for crisis-stricken small and medium-sized enterprises amounting to 25 billion euros. To prevent social security contributions from rising above 40 percent, health insurance funds and the statutory nursing care insurance system will receive a total subsidy of 5.3 billion euros this year. The Federal Employment Agency may receive a liquidity loan of 9.3 billion euros. A total of 500 million euros will be made available to secure vocational training in 2020 and 2021.
Federal government to assume half of trade tax shortfall
The financial strength of municipalities should also be strengthened. Cities and municipalities should not have to make cuts because of the loss of trade tax, Scholz assured. He said that the federal government wants to take over half of the loss of trade tax and hopes that the states shoulder the rest. A total of 6.1 billion euros has been earmarked for this purpose. In addition, the federal government will assume more of the costs of housing in the basic security for job-seekers than before. In addition, public post-transportation will be supported with 2.5 billion euros. 1.5 billion euros more is also to be provided for the expansion of all-day schools and all-day child care.
More money for climate protection and digitization
At the same time, the government is bracing itself for later expenditure. Dem 26 billion euros have been earmarked for the energy and climate fund, with a total of around eleven billion euros, he is to help reduce the EEG levy in 2021 and 2022. Additional spending is also planned for digital infrastructure. All in all, this is a "Wums package, with which we want to come out of the crisis to get the economy moving again", said Scholz. Let the crisis is not over yet. However, he is hopeful that Germany has the worst behind it. Referring to billions in reserves, which are also found throughout the supplementary budget, Scholz pointed out the need to still have financial resources in case of a possible second wave of contagion. In addition, the Finance Minister stressed in accordance with the debt rule in the Basic Law to repay part of the debt from 2023: From 2023, a total of a good 118 billion euros is to be repaid over twenty years, assured Scholz.