Due to Coronavirus measures, the economy has taken a blow – also in Germany. With these historic problems, you also need historic solutions. And Germany did just that: It passed a massive Konjunkturpaket (economy package). Let’s take a look what it looks like!

Rekordzahlen

Frankfurt am Main, the financial capital of Germany and of the European Union, since the European Central Bank has its seat here (Image by Igor Flek at Unsplash.com)

A Rekordzahl (record number) of people are in Kurzarbeit (“short-time work”, essentially people work fewer or no hours) and receive Kurzarbeitergeld (“short-time worker money”, a state-financed benefit for people that can no longer work full time due to a bad economic situation for their place of work). While during the entire Finanzkrise (financial crisis) of 2008 and 2009, 3.3 million people applied for Kurzarbeitergeld, just during these months of the coronavirus, 10.1 million applications came in. It’s a huge amount, and it looks like Germany will go through a rough time in the next few years, if not decades.

And so, Rekordzahlen require a proper response. That’s why this week, the Große Koalition (large coalition) decided on a Konjunkturpaket to the tune of 120 billion euros. Compared to … it is a real “Wumms”-Paket (“wham” package) as Bundesfinanzminister (Federal Minister of Finance) Olaf Schulz called it.

So what does it all consist of?

Well, the entire Konjunkturpaket has 57 Maßnahmen (measures). Too many to list here, and many quite technical, too. So we’ll have a look at the biggest ones.

First off, the very big one: A temporary reduction of the Mehrwertsteuer (Value Added Tax). Costing about 20 billion euros, the VAT on regular items is reduced from 19 to 16 percent and for low-tax items (certain basic necessities) from 7 to 5 percent from July 1 until December 31, 2020. It is a surprise move that nobody saw coming, but it can be significant for companies, and for Verbraucher (consumers), if this lower tax also results in a lower price in stores.

That’s what the German government hopes to achieve with this, at least. A Stärkung der Binnennachfrage (strengthening of internal demand) as it is written in the Konjunkturprogramm. Get people to spend more, basically. Several supermarkets have already announced that they will pass these savings on to the Verbraucher completely. We’ll see what will happen!

A second big Maßnahme is a one-time 300 euro payment for Familien mit Kindern (families with children). This is paid together with the Kindergeld (child allowance), so it only benefits families with children that are eligible for Kindergeld in the first place.

Furthermore, the Kaufprämie (buyer’s premium) for Elektroautos (electric cars) is increased from 3000 to 6000 euros for all cars costing up to 40,000 euros. The reduction of the Mehrwertsteuer of course makes this even better. The industry wanted this Kaufprämie for combustion engine cars too, but that was not implemented.

If you would like to learn more about this Konjunkturpaket, Angela Merkel did an interview with the ARD about this:

How is the Coronavirus dealt with in your country? Does it also cause record numbers? Let me know in the comments below!