Sunday

25th Jun 2017

Berlin plans stimulus package 2.0

  • Angela Merkel has come under fire for her slow reaction to the global crisis (Photo: The Council of the European Union)

The German government is working on a second stimulus package worth "at least" €30 billion, but no decision will be taken until the end of January, when US president-elect Barack Obama is sworn in.

Economy minister Michael Glos discussed a second package during a seven-hour meeting on Sunday between cabinet members and around 30 representatives of industry, trade unions and banks.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Chancellor Angela Merkel, for a long time under fire for not having responded swiftly enough to the financial crisis, pledged to oversee stronger collaboration between all actors involved. Germany was a "strong country" and these measures would help it to weather the storm, she said.

Two working groups, one on labour markets and the other on financial markets, would be immediately formed, finance minister Peer Steinbruck has said.

However, no decision would be taken before 20 January, when US president Barack Obama takes office. "When the US government puts something on the table, the German government will also have something ready," Bert Rurup, head of the economic mediation council within the German government said after the Sunday meeting.

Berlin would also maintain its line on not cutting VAT rates, as the UK has done recently, but would take "its own measures," Mr Steinbruck said.

According to a draft seen by the Wirtschafts Woche weekly, the second stimulus package would be a "mix of different measures" worth "at least €30 billion."

Its main aim will be to break the vicious cycle of inflation and pay raises. Another measure will be to lower the medical insurance contributions by beefing up the health care fund. A second infrastructure programme, as well as tax cuts for the socially disadvantaged have also been included in the draft.

The package would be mostly funded by external loans.

Meanwhile, Berlin has to failed to revive the inter-bank lending market and might soon be forced to modify its €500 billion bank rescue package, adopted in October.

Politicians led by Ms Merkel and Mr Steinbruck have lambasted the banks for parking their cash with the European Central Bank at very low interest rates instead of lending it to each other or to companies.

Speaking to Der Spiegel, American Nobel economics laureate Paul Krugman has accused both Chancellor Merkel and her finance minister, Mr Steinbruck, of still viewing the world as it was a year or two ago, when inflation and deficits were the main economic threats.

Trichet warns on fiscal indiscipline

Meanwhile, fiscal indiscipline in European rescue packages is not to be tolerated, as it could threaten the fragile economic confidence, president of the European Central Bank, Jean-Claude Trichet has told the Financial Times.

But he argued that the European Union's "stability and growth pact", which sets rules on public deficits and debt, offers flexibility to countries with stronger finances. "We would destroy confidence if we blew up the stability and growth pact," he said.

Mr Trichet said the global financial crisis poses a serious threat to industrialised economies. "We cannot afford in the future to put the concept of the market economy at risk as we did."

Row between EU ministers halts e-book tax rate

A bill to reduce VAT rates on e-books and e-publications has become the latest victim of a row between the Czech Republic and its partners over its own plan to collect VAT.

Focus

EU and China move to fill US void

At a summit in Brussels, EU and Chinese leaders will attempt to deepen ties on trade and climate as US president Trump plans to pull out of the Paris climate deal.

Italy reaches EU deal on failing bank

After months of negotiations, the European Commission and Italy agreed on the terms of rescue for Monte dei Paschi di Siena bank, including job cuts, salary caps and private sector involvement in the bailout.

News in Brief

  1. Merkel and Macron hold symbolic joint press conference
  2. Juncker has 'no' clear idea of kind of Brexit UK wants
  3. Belgian PM calls May's proposal on EU citizens 'vague'
  4. UK lacks support of EU countries in UN vote
  5. Spain to command anti-smuggler Mediterranean force
  6. Estonia confirms opposition to Nord Stream 2 pipeline
  7. Ireland and Denmark outside EU military plan
  8. EU leaders renew vows to uphold Paris climate deal

Stakeholders' Highlights

  1. EPSUOn Public Services Day, Stop Austerity! Workers Need a Pay Rise!
  2. EGBAOnline Gambling: The EU Court Rejects Closed Licensing Regimes In Member States
  3. World VisionFaces of Today, Leaders of Tomorrow: Join the Debate on Violence Against Girls - 29 June
  4. ECR GroupThe EU Must Better Protect Industry from Unfair Competition
  5. Malta EU 2017Better Protection for Workers From Cancer-Causing Substances
  6. EPSUAfter 9 Years of Austerity Europe's Public Sector Workers Deserve a Pay Rise!
  7. Dialogue PlatformGlobalised Religions and the Dialogue Imperative. Join the Debate!
  8. UNICEFEU Trust Fund Contribution to UNICEF's Syria Crisis Response Reaches Nearly €200 Million
  9. EUSEW17Bringing Buildings Into the Circular Economy. Discuss at EU Sustainable Energy Week
  10. European Healthy Lifestyle AllianceCan an Ideal Body Weight Lead to Premature Death?
  11. Malta EU 2017End of Roaming Charges: What Does It Entail?
  12. World VisionWorld Refugee Day, a Dark Reminder of the Reality of Children on the Move

Latest News

  1. Macron’s investment screening idea watered down by leaders
  2. Leaders unimpressed by May’s offer to EU citizens
  3. New Irish PM praises unscripted nature of EU summits
  4. EU extends sanctions on Russia
  5. UK's universities set 'Brexit wish list'
  6. Decision on post-Brexit home for EU agencies postponed
  7. May's offer on citizens’ rights dismissed as ‘pathetic’
  8. 'Historic' defence plan gets launch date at EU summit