German parties clash over €57b aid package
Europe’s largest economy faces its deepest recession since World War II
A Reuters file image.
BERLIN:
German Finance Minister Olaf Scholz has run into opposition from Chancellor Angela Merkel’s conservatives over a plan worth €57 billion ($61.65 billion) to help municipalities cope with plunging tax revenues caused by the coronavirus crisis.
Europe’s largest economy is facing its deepest recession since the Second World War, even as a lockdown to fight the virus is gradually eased. The drop in business activity has hit tax revenues and left a hole in public finances.
The aid package from Scholz, a Social Democrat (SPD), aims to help cities and towns stabilise their finances with a cash injection worth €12 billion to compensate for an expected fall in trade tax revenues, according to a finance ministry document seen by Reuters on Saturday.
The plan also contemplates extra relief for some heavily indebted municipalities worth €45 billion.
“This protective shield should not only bring cities and municipalities through the current difficult situation, but also enable them to do their job even better,” Scholz said. Scholz wants the 16 state governments to shoulder half of the costs and parliament to approve the plan before the end of this year.
Under Germany’s federal system, local authorities are in charge of a large chunk of public investments such as building roads and bridges as well as modernising schools and hospitals. Eckhardt Rehberg, budget chief of Merkel’s conservatives, criticised Scholz’s proposal, however, saying there was no agreement yet on the measures.
“Scholz can’t just decide on his own about the federal budget and distribute a double-digit billion euros sum across the country,” he said.
Published in The Express Tribune, May 17th, 2020.
German Finance Minister Olaf Scholz has run into opposition from Chancellor Angela Merkel’s conservatives over a plan worth €57 billion ($61.65 billion) to help municipalities cope with plunging tax revenues caused by the coronavirus crisis.
Europe’s largest economy is facing its deepest recession since the Second World War, even as a lockdown to fight the virus is gradually eased. The drop in business activity has hit tax revenues and left a hole in public finances.
The aid package from Scholz, a Social Democrat (SPD), aims to help cities and towns stabilise their finances with a cash injection worth €12 billion to compensate for an expected fall in trade tax revenues, according to a finance ministry document seen by Reuters on Saturday.
The plan also contemplates extra relief for some heavily indebted municipalities worth €45 billion.
“This protective shield should not only bring cities and municipalities through the current difficult situation, but also enable them to do their job even better,” Scholz said. Scholz wants the 16 state governments to shoulder half of the costs and parliament to approve the plan before the end of this year.
Under Germany’s federal system, local authorities are in charge of a large chunk of public investments such as building roads and bridges as well as modernising schools and hospitals. Eckhardt Rehberg, budget chief of Merkel’s conservatives, criticised Scholz’s proposal, however, saying there was no agreement yet on the measures.
“Scholz can’t just decide on his own about the federal budget and distribute a double-digit billion euros sum across the country,” he said.
Published in The Express Tribune, May 17th, 2020.