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Wed, Jan 14, 2009 - Page 10 News List

German leaders agree on 50bn euro stimulus plan

PLUGGING THE HOLES The backbone of the new plan involves investments of about 18 billion euros to improve railways, roads and schools, and tax cuts

AP , BERLIN

Senior members of German Chancellor Angela Merkel’s coalition said on Monday they had agreed on a multibillion-euro economic stimulus package to help the country out of recession.

The new package will run through next year and total about 50 billion euros (US$67 billion). Coming on top of an earlier plan worth 23 billion euros passed last month — criticized at home and abroad as too cautious — the new measures amount to one of the strongest stimulus plans so far in Europe.

The parliamentary leaders of both Merkel’s Christian Democrats and the Social Democrats told reporters the backbone of the new program involves investing between 17 billion euros and 18 billion euros to improve railways, roads and schools. They said the package also includes tax cuts and breaks, cuts to state health care contributions and one-off bonuses of 100 euros per child and 2,500 euros per car in exchange for junking a vehicle that is at least nine years old.

“All in all, it is a package that will help get us through the financial crisis and secure jobs,” Christian Democrat parliamentary president Volker Kauder told reporters.

Monday’s agreement, while widely expected, comes after weeks of bickering between the two parties over the best way to prevent Germany’s heavily export-dependent economy from sliding further into a recession and prevent job losses.

The EU’s largest economy is driven largely by exports, which in November saw their largest monthly drop since reunification in 1990.

The government in October also established a bailout package worth up to 500 billion euros. But only a handful of banks have used the fund, in part because of strict conditions on the money, including a salary cap for top managers.

Commerzbank AG is the largest private institution to tap the fund. Two separate requests totaling 18.2 billion euros have left the German government with a 25 percent stake in Germany’s No. 2 bank.

The new plan also comes in response to criticism that the earlier measures were poorly designed and executed, as well as evidence that the economic crisis is worsening in Germany.

Franz Muentefering, leader of the center-left Social Democrats — which share power with Merkel’s party — told the daily Bild newspaper that lawmakers hope this new package will have a more decisive affect.

“We are not under the illusion that we can plug all the holes,” Muentefering said. “But we are giving people the signal: We as politicians are doing everything humanly possible.”

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