We turn a piece further at all the screws
*The German government has wrapped up a "very good package" with measures to boost the economy, according to Robert Habeck in an interview with ntv.de. The German government is providing various incentives for more people in Germany to work. The controversial tax deductions for foreign skilled workers are only a small part of the whole. The government coalitions also warned Habeck against changing the rules regarding citizens' income. "That should not be stirred up," the Green politician said. The debate about suspending the debt brake is "settled." However, there is an uncertainty factor named Donald Trump in the difficult-to-agree budget 2025.
ntv.de: You often report on your conversations with entrepreneurs, even the smaller ones. Have you received any feedback on the growth initiative?
Robert Habeck: With the growth initiative, we have wrapped up a very good package that is good for the economy: bureaucracy reduction, tax incentives, incentives for more labor and skilled workers. I presented our plans to the 40 Dax companies on the day of the budget agreement. They welcomed it positively. On Monday, I visited Mercedes in Stuttgart. They were particularly pleased with the special tax deductions for electric cars in company fleets and the increase in the price cap for cars eligible for this subsidy. And in my conversation with the Chamber of Crafts Koblenz, there was a lot of praise for the fact that, in the future, a work permit will be issued if the Foreigners' Office does not object within two weeks. That has already arrived in the economy and will be very, very positively received.
You often encounter complaints about the German Supply Chain Act. You don't want to push this bureaucratic monster any longer until there are less burdensome provisions in the EU Supply Chain Act. How quickly can the EU directive be implemented into German law?
Most laws for the growth initiative should be implemented by the end of the year. A part of it will come as a supplementary budget law in November. For the Supply Chain Act, there will be a separate procedure. That is complex, but we can build on the German law for the implementation. That's why I hope it will go quickly.
Does the non-compliance with the German Supply Chain Act not need a separate law? Does this apply from now on?
We will implement the EU regulation as bureaucratically lean as possible during this legislative period, so that only about one third and thus fewer than 1,000 of the companies falling under the German Supply Chain Act will be directly affected. Until then, sanctions for violations of reporting obligations will be waived.
Have you ever counted how many laws need to be noveltied or newly written for the growth initiative in the short term?
The package includes about 50 points. However, not all of them are legislative. Approximately half of it will be implemented through legislative changes.
A topic is already causing trouble for the traffic light coalition from the SPD: The idea of exempting foreign skilled workers from paying part of their income tax for a certain period. The idea behind it is not entirely clear.*
The fundamental problem is that there is a shortage of labor and skilled workers everywhere, businesses cannot take on contracts anymore or have to shorten their opening hours, some have to give up. This labor and skilled worker shortage threatens the prosperity and growth perspective of the country. That's why our package puts a particular emphasis on mobilizing as much labor force as possible within the country: incentives for overtime, less part-time work, work in old age, activation of welfare recipients. A time-limited tax incentive, for example, for IT specialists from abroad, who are in strong competition on the world market and are desperately needed, is only a small part of it, and came as a suggestion from the economy. We have to see that more than a dozen of our European partners are granting similar advantages and thus have a competitive advantage over us.
It sounds like favoritism towards foreigners when they are supposed to receive more money for the same work as people with a German passport. Is that a good idea, so soon before the state elections?
I can understand this argument. It is explicitly planned that such tax incentives will be reviewed after some time. If they don't work, they will be discontinued.
A decision of greater significance is certainly making it easier for foreigners to access the labor market. The two-week objection period is a paradigm shift.
Yes. And I would like to thank craftsmen and craftswomen for constantly raising this issue with great urgency. I often encounter the situation that a car repair shop, for example, wanted to hire someone who could do the job and wanted to do it. And then the foreigners' office discovered a problem in the qualification certificate in column X, footnote Y. Or the language skills were deemed insufficient. Masters have asked me, why should they be masters if they cannot decide themselves when someone is capable of working for them? The two-week objection period can save a lot of bureaucracy and aggravation. And refugees can financially stand on their own feet more quickly.
It will be interesting to see how many people will make use of the incentives for working beyond retirement age.
That is a good solution that does not force anyone but is an offer to those who still want and can work longer. Anyone who has exceeded the retirement age receives the social contributions that employers still have to pay as salary. For an average wage, that's about 250 Euros more per month. That adds up.
I respect the high performance of those who have worked for 45 years under physical strain and then say that's enough. That's why I was against abolishing the pension at 63, which is now almost 65. And that's why I'm such a big supporter of incentive systems: We need all knowledge, ability, experience, and expertise. There are many people who make their work with great passion, regardless of how high the income or pension is. But financial incentives can be motivation for many people to work an extra year or two. What's important is the signal: Work pays off. That's why we also create incentives for special, but not exceptional life situations, such as survivor pensions. These are usually women whose survivor pension would be deducted from their salary, making it hard for them to earn a living. We're changing that. We're turning every screw a little further.
On tax deductions for overtime hours, are you promising a significant effect or is it more about the symbolic effect "Germany is pulling up its sleeves"?
For many people, these are indeed relevant amounts and have nothing to do with symbolism. Overtime hours are demanding and exhausting. Whoever works them and receives a supplement as compensation for the additional burden should be able to keep it.
You're also subsidizing overtime hours that are already being worked in large quantities.
It's only about the supplements for overtime hours at the moment. But it's also good that people who already work overtime hours receive the financial recognition for it. That has something to do with respect. In total, the sum of these measures will increase the volume of work. We can always find individual cases that speak against an idea and make regulations unnecessarily complicated and cumbersome to consider every single case. But that's not a solution, doing nothing and leaving the labor market as it is. The previous governments did that. Then the economic growth remains at its low level. Or we say "No, that's not enough!" and try to get more people into more work.
Will the traffic light coalition also push the employment volume with citizen's income sanctions coming faster, shortening the period of eligibility for social assistance, and allowing employers to assign more tasks to employees? Have you exhausted the possibilities for worsening the impact of citizens' income?
For long-term unemployed people, we're now creating incentives for employment with a job-finding bonus. At the same time, the refusal of suitable work will be stricter sanctioned. The practitioners I've spoken to emphasize again and again that regular and close supervision is good for the people. Missing an appointment can also lead to stronger sanctions. That's a good rule. It's important to me: It's an achievement that we, as a state, are solidary with people who need our help through the citizen's income. But for the few who misuse the citizen's income, it must also be a response from the state. We owe that to the people who work hard and finance the citizen's income with their taxes. Sanctions have of course constitutional legal limits - and that's a good thing.
Are you aligning with resistance from the SPD and Green factions?
We have additionally agreed on further easements in addition to premiums: We are discontinuing the child supplement for children from poor families not only but also increasing it by five euros, in line with child benefits. Implementing this was not easy. The measures are well thought out, it is a comprehensive package that we all need to keep in mind. This should not be rushed.
You have brought up the issue of incentives for electric cars in company fleets. This market has been destroyed by car manufacturers through discount wars. It seems little market-economic that the state now considers subsidizing these manufacturers.
As Federal Minister of Economics, I have a special responsibility for the German automobile industry. German manufacturers, which sell particularly strongly in the commercial vehicle sector, need support now. The accuracy of this measure in favor of German carmakers should be appropriate, and it is limited to approvals up to the year 2028.
Nevertheless, the state is stepping in because German electric cars are not affordable for the masses.
One can certainly say now: "They should have been more consistent on electromobility and brought cheaper electric cars to the market sooner." That's all right, but it doesn't help. I could stand by and watch critically. But it's about locations, many jobs, economic power. That's why I'm presenting solutions instead, so we can give the manufacturers a push again. German manufacturers will also produce competitive cars in the future.
All in all, these measures are expected to lead to 0.5 percentage point more growth, which has already been priced into the budget in 2025. The budget is therefore on rather shaky ground.
Correct: It is a solid budget. We did not have a majority for it in the coalition, so we have fully exhausted the creditworthiness of the state and agreed on more measures that bring the same amount. And of course, we live in dynamic times. The prognoses for the development of the conjuncture, unemployment, and tax revenues have been fluctuating in recent months.
In a letter to the Green Bundestag faction, you clearly stated that you are in favor of significantly more state investments in these times. Why then are you taking a path that contradicts your convictions?
All major institutions in business and science consider the German debt brake in its current form too restrictive. We need to invest more in our competitiveness, education, defense, internal security, and infrastructure. But I adhere to our coalition agreements, even if the framework is too narrow. In the next election campaign, however, we will have to conduct the debate on investments.
SPD faction leader Rolf Mützenich has explicitly ruled out a further debate on the suspension of the debt brake. Is this option off the table since Friday?
If nothing else happens, I consider the question of the crisis with the budget proposal we have presented to be settled.
The SPD insisted on clarity before the summer break and thus forced this budget showdown in the past week. Do you have concerns that the debate will be reopened again before the state elections in the east?
No. We will pass the budget resolution as a cabinet on July 17th, then Parliament is next. If the economic data in November changes again, we will adjust. There is an uncertainty factor that the budget does not yet reflect. This is the Presidential election in the USA. It takes place approximately two weeks before the passage of the budget in the Bundestag, so shortly before. If then Donald Trump wins, something really fundamental could still change. How we will deal with that, cannot be said yet.
Annalena Baerbock has announced her withdrawal from another chancellor candidacy. Was she surprised? Are you running?
I am always in close contact with the Foreign Minister, who does an excellent job in difficult times. Thanks to her, Germany is a reliable partner in the world. And as always, we will decide on questions of the candidate selection together with the party leadership - and at the given time.
Robert Habeck spoke with Sebastian Huld
- Robert Habeck, from Alliance 90/The Greens, praised the German government's growth initiative, which includes measures such as bureaucracy reduction, tax incentives, and incentives for more labor and skilled workers.
- Habeck visited Mercedes in Stuttgart and received positive feedback on the special tax deductions for electric cars in company fleets and the increase in the price cap for cars eligible for this subsidy.
- The German government is aiming to mobilize as much labor force as possible within the country, with a focus on incentives for overtime, less part-time work, work in old age, and activation of welfare recipients.
- A time-limited tax incentive for IT specialists from abroad, who are in strong competition on the world market and are desperately needed, is only a small part of the growth initiative.
- The two-week objection period for work permits for foreigners is expected to save a lot of bureaucracy and be very positively received by businesses.
- Habeck emphasized that the growth initiative is good for the economy and has received positive feedback from both entrepreneurs and major companies.
