Federal Cabinet adopts package of measures: "Securing Jobs by Strengthening Growth"

In presenting the German Government's package of measures to ensure growth and jobs, Federal Minister of Economics and Technology Michael Glos stated: "By adopting this package of measures today, we are acting responsibly to help safeguard prospects for economic growth in our country. We are ensuring investment in our future and thereby securing valuable jobs."

The adopted measures - to be implemented in 2009-2010 - will support investments and contracts totalling approximately €50 billion and will be directed toward companies, private households and municipal authorities.

Minister Glos added, "In my view, it is important that the bulk of the measures target small and medium-sized firms in particular. For example, in order to ensure that these firms have access to a sufficient supply of credit, we have established additional financial resources at the KfW in the amount of 15 billion euros. The temporary re-introduction of declining balance depreciation rules and special depreciation allowances, together with the increased tax deductibility of work performed by skilled craftsmen, will also serve to boost growth and jobs in small and medium-sized companies."

According to Glos, the package of measures forms part of the Federal Government's overall economic and fiscal policy strategy: "In addition to these measures, it is above all the successful reforms of recent years that will make our economy resilient during this difficult phase. Without these reforms, we would not be in the good starting position we are in now, with under three million unemployed persons for the first time. For this reason, it is absolutely necessary that we maintain our current policy course, which involves successful reforms, reduced tax burdens and responsible budget policies."

The newly adopted package includes the following key measures:

1. Short-term tax relief for businesses: the Federal Government will introduce, for a two-year period, declining balance depreciation in the amount of 25% for movable assets. In addition to these declining balance depreciation rules, special depreciation allowances for small and medium-sized enterprises will also be expanded temporarily.

2. Improved investment opportunities:

• The KfW will expand its financing instruments, particularly for larger SMEs, in order to prevent a potential credit crunch. To this end, additional credit in the amount of €15 billion will be made available through the end of 2009.
• To boost investment in the energy performance of buildings, the Federal Government will increase funding for the CO2 building renovation programme and other measures by €3 billion.
• To ensure a steady level of investment in important infrastructural projects, €3 billion in funding will be added to the KfW's infrastructure programmes for structurally weak municipalities.
• The Federal Government will speed up urgent transport investments and will make an annual amount of €1 billion available for this purpose in both 2009 and 2010.

3. Structurally weak regions will benefit from approximately €200 million in additional funding that the Federal Ministry of Economics and Technology will provide for the joint federal/Länder programme, "Improving the Regional Economic Structure". These funds will be part of a special programme for 2009.

4. Private households will benefit from two measures in particular:

• The Federal Government will introduce a one-year motor vehicle tax exemption for all purchases of new motor vehicles. The motor vehicle tax exemption will be extended to a maximum of two years for motor vehicles that comply with Euro 5 and Euro 6 standards.
• Tax deductions for work performed by skilled craftsmen and for building maintenance and modernisation measures will be expanded significantly starting in 2009.
  Support in terms of employment policy will also be provided by extending the duration of compensation for short-time employment (Kurzarbeitergeld) from 12 to 18 months. This extension will apply for a temporary period of one year.