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German divisions on show over new virus stimulus package

4 min

Frankfurt am Main (AFP)

Germany's governing coalition dampened expectations Tuesday for a quick deal on tens of billions of euros in stimulus to reboot the post-coronavirus economy, including the key sticking point of subsidies for the powerful auto industry.

Even as negotiations got underway with Chancellor Angela Merkel's CDU conservatives, the leader of their centre-left SPD junior partners Norbert Walter-Borjans warned that "it will take a long time and probably won't be over today".

"All the details have to be discussed carefully" with talks "to be continued Wednesday," CDU spokesman Hero Warrings posted on Twitter.

Many of the roughly 60 items on the agenda fall along familiar lines, with the CDU favouring tax cuts and other pro-business measures, while the SPD prefer one-off payouts to families and support for struggling local governments.

But support and opposition for massive auto subsidies cuts across party lines, setting regions and other industrial sectors against one another as they all seek cash from the government.

The subsidy plans for an industry that employs around 800,000 people have also energised protesters who say the coronavirus crisis offers a chance to take the green option instead and really fight climate change.

Around 2,000 anti-fossil fuels demonstrators formed a human chain through Berlin's government district Tuesday as government talks kicked off.

Protests have also been called across the country by youth environmental movement "Fridays for Future," after thousands turned out last week in 27 cities against any handouts to carmakers.

"A bonus for car purchases could well be the most controversial point at the coalition talks today," news site Spiegel Online commented.

Overall, the entire government direct aid programme could total up to 80 billion euros ($89 billion), weekly Bild am Sonntag reported Sunday.

This money will come on top of a package comprising loan guarantees, subsidies and a beefed-up shorter-hours programme worth more than one trillion euros which was decided as the pandemic broke over Germany in March.

"We will decide a support programme that helps the economy to find its feet and grow again," Merkel said in a weekly video podcast Saturday, urging "a boost to innovation and sustainable growth".

- Green eyes at France -

French President Emmanuel Macron's announcement last week of eight billion euros to help carmakers transition towards electric vehicles stoked jealousy across the border.

"It can't be that France is spending eight billion euros supporting the car industry, while we spend nine billion on (airline group) Lufthansa -- and not for the keystone of our economy," conservative heavyweight Markus Soeder told weekly Welt am Sonntag.

The Bavarian premier's state hosts major carmakers BMW and Audi, while SPD-run Lower Saxony state is similarly fighting for support for Volkswagen.

But both Berlin coalition parties are sceptical.

The SPD is also largely against subsidising traditional fossil-fuel driven engines.

The influential Ifo economic institute on Monday said that while past cash-for-clunkers schemes "enlivened sales for a short time... the bottom line is that there is no evidence in most studies that more cars were sold" overall.

"More for the auto industry could quickly mean less for other sectors" by redirecting consumer spending, Ifo expert Felix Roesel added.

Carl Martin Welcker, president of the VDMA machine-tool makers' federation -- another key industry -- warned a car bonus would "discriminate" against other sectors.

- Tax cuts or handouts? -

Many in both the conservative and centre-left ranks back bringing forward the abolition of a "solidarity surcharge" introduced to cover the costs of German reunification after 1990.

Other suggestions offer less chance for consensus.

SPD Finance Minister Olaf Scholz has revived a pre-pandemic idea for the federal government to take over the debts of struggling local governments, so far rejected by conservatives.

Merkel's CDU party is also lukewarm on mooted one-off 300-euro payments to families with children or increasing the level of unemployment benefit payouts.

They prefer ideas such as forgoing Berlin's share of local business taxes or investing in digitisation of government bureaucracy.

Conservative Transport Minister Andreas Scheuer and Research Minister Anja Karliczek said some cash should be pumped into developing new drive technologies for cars, like hydrogen generated from green electricity.

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