September 04, 2020
Corona: The German government signs the second corona-virus stimulus package into law
The German economy has suffered a major contraction in the wake of the corona crises. The gross domestic product sank 10.1 percent compared to the first quarter.
At the beginning of June, the ruling black-red ruling coalition passed a record stimulus package in the sum of 130 Billion Euros to help with the economic recovery.
The package consists of 56 individual measures. Among them are long and short-term measures to support the economy and to manage the corona-crises as well as measures aimed at long-term future investments, but rather will be effective in the middle-term.
The main aspects of the program include:
- A short-term reduction in value-added tax from 19 to 16 percent beginning on 1 July and ending on 31 December 2020. The measure is designed to help boost consumption.
- Additional interim support in the sum of 25 Billion Euros for companies, businesses and firms hit particularly hard by the corona-crises.
- Strengthening public demand by bringing forward earmarked federal investment projects in the tune of 25 Billion Euros.
- Generous state and federal government payments to local communities to adjust for shortfalls in excise and franchise tax receipts due to the corona-crises.
- Capping the level of the social security contributions at 40 percent until 31 December 2021.
- Cushioning the increases in the price of electricity.
- A limited time increase of the write off for depreciation of capital equipment.
- Bonus for small and mid-sized companies who are, despite the corona-crises are still hiring and training apprentices.
- Support for electro-mobility with several measures. For example, through a limited-time doubling of the incentive for the purchase of electric automobiles.
- A limited-time expansion of the research assistance program.
- Comprehensive state investment in technologies of the future, for example, hydrogen technology and artificial intelligence.
- Bonus child support payments at 300 Euro per child.
The vbw welcomes the stimulus package. The CEO of the vbw, Mr. Bertram Brossardt stated that „ with the temporary reduction in the value-added tax and the strengthening public consumption, the economy is being given a needed impulse. The economic impulse combined with investments in the projects of the future make the stimulus package more comprehensive. The 25 Billion Euro transitional support for companies mired in serious economic trouble is a real lifeline. This will provide additional liquidity for small and mid-sized companies”.
He added that „it now needs to be seen if the measures take hold. Otherwise further there will need to be further discussions about possible additional measures “.