Merkel Promises Government Help During Economic Bad Times

German Chancellor Angela Merkel outlined an economic stimulus package aimed at helping companies weather the financial downturn. She also called for a quick reform of the global financial system.

The German government is prepared to roll out a series of economic measures to carry the country though the next year, when economists are expecting the country's economy to come to a virtual standstill.

 

"In 2009 we will have bad news, but we are going to do something so that things can and will get better in 2010," Merkel told a group of German employers in Berlin on Tuesday, Nov. 4. "With this package of measures, we are building a bridge for people, as well as for employers. A bridge for investment, for the protection of jobs, until the economy gets going again under its own steam."

 

Economists skeptical of plan

 

The measures Merkel is proposing include cheap loans for firms, increased investment in public infrastructure and tax breaks for low-pollution cars. Merkel's cabinet is expected to approve the stimulus package on Wednesday.

 

The package, which will include "courageous, targeted and sustainable" measures, is expected to cost between 25 billion euros and 30 billion euros ($32 billion to $38 billion).

 

 

Economists have expressed skepticism that the government's package will have much of an impact on Europe's biggest economy. The public also seems unconvinced, according to a recent Emnid opinion poll in Bild am Sonntag newspaper which suggested that 70 percent of Germans feel that such measures will prove futile.

 

Dieter Hundt, head of the BDA employers' lobby, welcomed the government measures, noting that some sectors had already suffered "dramatic" falls in demand. For example, several German car manufacturers have announced plans to temporarily stop production because of plummeting demand.

 

But German banks also need to play their part in helping the economy recover by once again supplying credit at "reasonable" rates of interest, Hundt said.

 

Balancing the budget

 

Merkel said despite the economic slowdown, Germany will not abandon its goal to balance the federal budget.

 

"We must not lose sight of the aim of budget consolidation," Merkel said.

 

Government officials have warned a prior goal to have the budget balanced by 2011 could prove difficult. Merkel said it was her goal to have the budget balanced no later than 2013.

 

Quick reform?

 

 

Merkel also called on speedy negotiations to reform the global financial system. A fix needs to be agreed on in the upcoming months and said it would be a mistake if the negotiations drag on for years.

 

Merkel wants the International Monetary Fund to have greater jurisdiction over financial companies that operate internationally. She also called for more transparency and stricter rules to prevent excessive risk taking.

 

EU leaders will meet in Brussels on Friday to prepare for a meeting of world leaders that will take place in Washington next week.