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Mon, Dec 29, 2008 - Page 10 News List

German FM in favor of state aid for automakers: report

AFP , BERLIN

Germany’s foreign minister and Social Democrat rival to German Chancellor Angela Merkel says he is in favor of state aid for German automakers, a German Sunday newspaper reported.

The German auto industry is “the spinal cord of our economy,” Steinmeier told the Welt am Sonntag, according to advance copies. It is Germany’s largest industry and biggest export.

“We must also stimulate the purchasing of automobiles with state incentives,” such as a tax break, said Steinmeier, a member of Germany’s “grand coalition” government and expected rival to Merkel in next year’s election.

New car registrations in Germany slumped by 18 percent last month compared with the same month last year, according to the auto manufacturers’ association VDA.

For all of this year, VDA says car sales are expected to hit their lowest level since the reunification of west and east Germany in 1990, at less than 3.1 million vehicles. Sales are expected to be even worse next year.

One out of seven German workers is directly or indirectly involved in the car industry, according to VDA.

The US auto industry dodged almost certain collapse last week when the US government extended US$13.4 billion in loans to cash-strapped General Motors and Chrysler. Merkel, who has been criticized for not doing enough to help Europe’s biggest economy out of recession, has called a cabinet meeting for Jan. 5 to discuss a second stimulus package.

Meanwhile, troubled German property lender Hypo Real Estate is being investigated for possible insider trading, according to the weekly Der Spiegel to be published today.

It said prosecutors in Munich had launched an investigation in February after large sales of shares were registered just before the private bank announced a 35 percent drop in assets.

After a German association of small shareholders filed a complaint, prosecutors in Munich opened an investigation into accusations that Hypo Real Estate (HRE) directors provided insufficient information on the bank’s situation before it required an emergency bailout.

HRE posted a net loss of 3.1 billion euros (US$4.3 billion) in the third quarter, and said a week ago that it expects to report new losses in its fourth quarter and annual results.

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