Economic stimulus package proposed in Germany

The GCEE experts expected that the coronavirus crisis would cause a "historically large slump" in German economic output in the first half of 2020. Despite financial aid by the government, many companies were still endangered by insolvency.

The German Council of Economic Experts (GCEE) announced on Friday that it has proposed an economic stimulus package that would support structural change in the country during the coronavirus pandemic.

The government should refrain from introducing a large number of sector-specific measures, such as a purchase premium for vehicles, which is currently being discussed in Germany, the experts wrote in an article for the German newspaper Sueddeutsche Zeitung on Friday.

Instead, GCEE suggested three measures “to support economic recovery and accompany structural change” in Germany, including more possibilities for tax loss carryback and carryforward.

This measure would provide companies with “direct, short-term liquidity” and increase the incentive to invest today, according to GCEE, which was established in the 1960s and is an academic body that advises the German government on economic policy issues.

Furthermore, a “quick and comprehensive reform of energy prices” in Germany would provide noticeable relief for households and businesses alike, the experts noted.

Due to the regressive effect of energy taxes, this would increase the disposable income of low-income households in particular. In addition, a lower electricity price would support the transformation towards a more climate-friendly energy system, according to the experts.

Thirdly, GCEE proposed to promote private and public investments in education, public transport and the expansion of digitization in Germany.

Through digital education and training, German companies and employees could use the additional available time caused by short-time work and unemployment during the current COVID-19 crisis to develop new skills and prepare for the post-recession period, said the experts.

Last week, the German Federal Statistical Office (Destatis) announced that the country’s gross domestic product (GDP) in the first quarter of 2020 had declined by 2.2 percent compared to the previous quarter.

The GCEE experts expected that the coronavirus crisis would cause a “historically large slump” in German economic output in the first half of 2020. Despite financial aid by the government, many companies were still endangered by insolvency.

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Nathan Morley covers travel, tourism and European news.