German coalition parties wrestle over fiscal stimulus package

BERLIN (Reuters) – Chancellor Angela Merkel’s ruling coalition wrestled on Tuesday over the final details of a massive stimulus package which is meant to help companies and employees in Europe’s largest economy recover more quickly from the coronavirus pandemic.

FILE PHOTO: Protesters hold a banner reading “Economic activity with future!” during a demonstration against the planned state aid for Germany’s automobile industry, amid the spread of the coronavirus disease (COVID-19), in front of the Brandenburg Gate in Berlin, Germany, June 2, 2020. REUTERS/Fabrizio Bensch

Senior members of Merkel’s conservative CDU/CSU bloc and the co-governing Social Democrats (SPD) were scheduled to start negotiations in the chancellery at 1200 GMT. They were expected to run well into the evening.

The fiscal stimulus package, which comes on top of an unprecedented 750 billion-euro rescue package agreed in March, will include measures worth up to 100 billion euros, government and coalition sources have said.

Finance Minister Olaf Scholz, from the SPD, wants the stimulus measures to be “timely, targeted, temporary and transformative”.

Among the proposals on the table are cash handouts for families to boost consumption, extra relief for municipalities struggling with lower tax receipts and further funds for companies with fewer than 250 employees.

Economy Minister Peter Altmaier has suggested additional support for the automobile industry, including subsidies for environmentally friendly technologies and cash incentives to buy new cars with zero or low carbon emissions.

SPD co-leader Norbert Walter-Borjans is against another cash-for-clunkers programme that would include support to buy vehicles with combustion engines. A survey showed last week that a majority of Germans back his stance.

The Ifo institute says past cash-for-clunkers programmes have provided hardly any lasting boost to overall growth as they simply encourage consumers to bring forward or redirect decisions.

Underlining the extent of the economic crisis, the number of German workers on reduced hours rose to 7.3 million in May, with almost all sectors represented, an Ifo poll showed.

The number compares with around 1.5 million workers on shortened hours during the financial crisis in May 2009.

Reporting by Michael Nienaber; Editing by Gareth Jones

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