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Mon, Dec 08, 2008 - Page 10 News List

Merkel remains opposed to vouchers

UNINTERESTED The German chancellor has argued that such measures would rip a giant hole in the budget and spark only a very brief flurry of economic activity

AFP , BERLIN

With Germany in recession, a growing chorus is ditching the Christmas carols and raising their voices instead for free shopping vouchers to spread a little festive cheer in Europe’s biggest economy.

But despite the obvious appeal of such a crowd-pleaser heading into an election year, German Chancellor Angela Merkel is insisting on playing Scrooge — for now at least.

The voucher idea is simple, originating from the leftist wing of the Social Democrats (SPD), junior partners in Germany’s ruling coalition, 10 months before they and Merkel’s conservatives face off in a general election.

Consumers would receive coupons — most advocates suggest 500 euros (US$636) — that they could trade in for goods and services.

HOUSEHOLD PROJECTS

“A new refrigerator, small renovations around the house, the things people have been putting off,” said Andrea Nahles, a deputy leader of the SPD.

Merkel, however, is still drawing the line, saying such measures would rip a giant hole in the budget and spark only a brief flurry of economic activity that would fizzle out before it had done much good.

So far, economists and most of the press agree that the vouchers would be a cheap and ineffective political ploy.

“The vouchers would only boost the economy for three months at the most and the effect would disappear if the recession is a long one,” the Sueddeutsche Zeitung newspaper wrote on Thursday.

German consumers are notoriously frugal, born of a persistent postwar aversion to personal debt.

But German Finance Minister Peer Steinbrueck, a centrist Social Democrat, also opposes any hasty measures to encourage a shopping spree, saying the voucher proposal would cost between 30 billion euros and 40 billion euros.

In May, the US issued tax rebate checks in a bid to spur spending. But critics say the US model points up the pitfalls — after the party, “all that is left is the bill to be paid by the state,” conservative Economy Minister Michael Glos said.

UNHAPPY RETAILERS

Perhaps surprisingly, German retailers also oppose the vouchers, noting that the holiday shopping season that opened last weekend looked fairly promising despite the economic downturn.

“At the moment, the decline in inflation and unemployment and a rise in incomes are stimulating spending,” said the head of the German Retailers Association, Stefan Genth.

He warned that the promise of vouchers in the coming months could backfire, hobbling holiday sales while Germans put off spending until they get their state-sponsored windfall.

“That’s the last thing we need in the middle of the Christmas season,” Genth said.

Business leaders say public money would be more wisely spent on across-the-board tax cuts.

But Merkel has also firmly rejected any sweeping tax reform until after the September election, in the name of fiscal austerity.

Her largely hands-off response to Germany’s first recession in five years is coming in for louder and louder criticism.

SARKOZY MODEL

A leading Social Democrat on economic issues, Karl Lauterbach, told the mass-market Bild newspaper Merkel needed to take a page from her fellow conservative, French President Nicolas Sarkozy, who unveiled an ambitious, 26 billion euro stimulus plan on Thursday.

The package includes a one-off “bonus” of 200 euros for the lowest-income French families.

Last month, Merkel rolled out a package of temporary tax breaks and infrastructure spending that she valued at 32 billion euros over two years and said will stimulate 50 billion euros in economic activity.

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