Habeck expresses concerns over the expansion plan
The coalition government, led by the traffic light party, is preparing to unveil a significant financial aid plan for the nation's economy. However, this move might result in substantial tax reductions for the states. Economy Minister Robert Habeck has expressed concerns that the project could encounter substantial obstacles.
Habeck, while addressing a gathering of his party's economic association in Berlin, expressed concern that the proposed economic stimulus plan might not attain the anticipated size. He criticized the initiative as being "limited in scope and fragmented." He attributed this to the need for the states to account for their tax earnings losses in their budgets.
The traffic light coalition intends to revitalize the economy through a series of measures. This includes billions of euros in tax incentives for businesses. Katharina Beck, a finance politician within the Green party, stated that the relief package would amount to approximately 21 billion euros annually for businesses. Central elements of the package require the approval of both the Bundestag and the Bundesrat, in addition to the Bundestag.
However, this initiative could also result in billions of euros in tax revenue losses for the states. In the spring, the Growth Opportunities Act of the federal government, offering tax breaks for businesses, was considerably smaller in volume than initially planned after mediation efforts by the Bundesrat and Bundestag. Habeck highlighted the importance of investing in the green transition of the economy and the economic downturn, stating, "Investment must now be made again."
Germany's economic outlook is bleak
That said, the scope of the economic stimulus plan should actually be considerably larger to set a powerful precedent that encourages investments in green technology within Germany. Habeck criticized Germany's fiscal rules, arguing that they were not designed for "this particular era." He has repeatedly advocated for reforming the debt brake, but the coalition partner FDP has not agreed.
Leading economic research institutions revised their economic forecast for the current and upcoming year that very day. According to their revised projections, Germany's GDP might decline by 0.1% this year. Initially, the institutes had projected a minimal increase of 0.1%. The forecast for the upcoming year was also revised downward. A 0.8% growth rate is now expected, compared to the 1.4% growth that was initially projected.
The traffic light coalition's economic stimulus plan includes substantial tax cuts for the states, totaling billions of euros annually. Habeck emphasized the need for the states to account for these potential tax revenue losses, as they could impact their budgets significantly.
