Germany prepares 130 billion euro stimulus package to boost consumption and investment

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The German government has decided to prepare an economic stimulus package worth 130 billion euros (approximately 177.5 trillion won) to respond to the economic impact caused by the novel coronavirus infection (COVID-19).

According to Bloomberg and other sources on the 3rd (local time), the German government announced an economic stimulus package worth 130 billion euros, including a reduction in value-added tax. It will be implemented until next year and used to recover consumption and investment, which have been depressed due to COVID-19.

The government’s announcement came after the coalition ruling parties, the Christian Democratic Union (CDU) and the Social Democratic Party (SPD), reached an agreement following two days of negotiations. The funds will be raised through additional government bond issuance.

According to the stimulus package, the German government will reduce the VAT rate from 19% to 16% from July to December. The reduced tax rate applied to food and other items will also be lowered from 7% to 5%. Families with children will receive 300 euros per child, subsidies for electric vehicle purchases will be doubled, and tax reductions for corporate investments are also included.

As Europe’s largest economy, Germany is facing serious concerns about an economic recession due to COVID-19. Germany’s gross domestic product (GDP) is expected to decrease by 6% compared to the previous year. This is a more severe economic contraction than during the 2008 global financial crisis. Accordingly, the German government’s position is to focus on revitalizing consumption and investment to recover the economy.

Chancellor Angela Merkel said, "We are trying our best to do what we can in this very, very difficult situation."

This content was produced with the assistance of AI translation services.