With the aim of relaunching the stagnant economy of Germany, the coalition government of Chancellor Olaf Scholz yesterday approved the so-called Growth Opportunities law for the period 2024-2028, whose main aspect is the reduction of corporate tax and other tax relief for small and medium-sized companies worth about 7,000 million euros per year. The amount of the package in those five years will therefore add up to around 32,000 million in total.
The text now enters a consultation process with the länder and municipalities for possible adjustments, and will then go to the Bundestag (lower house of Parliament) for debate and final vote.
The future law favors those companies that invest in climate protection, offers tax incentives for research and allows them to offset past losses with profits from other years. Thus, in a period of four years, 80% of the losses will be able to be deducted instead of 60% as up to now, said the finance minister, the liberal Christian Lindner. The text also includes measures to reduce bureaucracy, a factor that slows down companies.
All in all, the German government is not losing sight of the fight against inflation, which Chancellor Scholz pointed out as a “high priority”, shortly before it was also revealed yesterday that year-on-year inflation in Germany fell slightly in August, but less than the expected. It stood at 6.1% and in July it had been 6.2%, according to provisional data from the Federal Statistical Office (Destatis). According to Scholz, the European Central Bank (ECB) is doing the right thing with its tightening of monetary policy.
For its part, the German government is treading carefully to prevent its economic stimulus measures from triggering inflation again. “The measures to promote the economy must be so specific and precise that they do not cause a new rise in inflation, but rather help stimulate growth,” said Olaf Scholz at a press conference with Lindner and the Minister of Economy, the Green Robert Habeck, after the two-day recess of the ruling coalition of Social Democrats, Greens and Liberals at Meseberg Palace, 70 kilometers north of Berlin.
Europe’s leading economy stagnated in the second quarter, showing no signs of recovery from a winter recession of two consecutive quarters, in which GDP fell 0.4% (October to December 2022) and 0.1% (January to March of this year). German industry has been affected by the increase in energy prices resulting from the Russian invasion of Ukraine, added to slow global growth, which caused a 1.1% drop in German exports in the second quarter , traditional strength of the economy of this country.
Chancellor Scholz assured that there are signs that an economic recovery is coming in Germany. However, the Bundesbank, the German central bank, was pessimistic in its August monthly bulletin, published last week, warning that the German economy is going through “a phase of weakness” and indicating that “production is expected to economy stagnates more or less in the third quarter.
In the first draft of the future law, which was released at the end of July, the tax relief measures were around 5,700 million euros a year, an amount that has finally been increased to 7,000 million. The text also includes a housing amortization mechanism of 6% per year for the construction sector, which is affected by the rise in interest rates. Germany, where the real estate market is unable to meet the urgent demand for housing, cannot afford to stop building new flats and houses.
