Germany’s chemicals see shortcomings in €130bn stimulus package

LONDON (ICIS)–Germany’s federal government has agreed a €130bn stimulus package to revive the economy following its collapse amid the lockdowns to contain the coronavirus, but chemicals trade group VCI said it had shortcomings.

The package comes on top of an immediate rescue plan the government agreed in March, and a recent EU recovery plan.

While Europe’s largest economy so far seems to be coping with the health crisis – with around 182,764 infections and 8,581 deaths, according to the latest data on 4 June – its export-oriented economy was hit hard.

Among the measures included in the new package are:

– Temporary reductions in VAT sales taxes and aid for families with children
– Drivers buying an electric vehicle (EV) priced €40,000 or less by the end of 2021 will get an incentive premium of €6000
– An additional €2.5bn to improve and extend the EV charging infrastructure
– A €50bn fund to invest in areas such as the hydrogen economy, quantum technologies and artificial intelligence
– Federal and state help for municipalities, which saw their largest source of revenue, a business tax (“Gewerbesteuer”), collapse because of the crisis
– Additional loans and liquidity support for “particularly stressed” small and medium-sized enterprises (SME), called Mittelstand in German, which saw sales and demand collapse during the crisis

Notably, the package does not include incentives for the purchase of conventional gasoline and diesel cars.

CHEMICALS REACTION
Germany’s VCI largely agreed with the content and timing of the stimulus package.

In particular, the VAT cuts should stimulate demand in the second half of 2020, it said.

However, the package is falling short as it is not a growth programme for the transformation of the economy, a transformation that is needed to create new products and process, thus strengthening the country’s competitiveness, the group said.

Germany needed a programme that stimulates permanent growth and strengthens its competitiveness as a location for production and investment, said VCI director general Wolfgang Grosse Entrup.

He called for a reduction in Germany’s corporate taxes to an internationally competitive level of 25%, investments in digital and conventional infrastructure, faster project approval processes, and a cut in red tape.

Front page picture source: Torsten Kruger/imageBROKER/Shutterstock

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