The World from Berlin 'The Recession Is Going to Be Ugly'

On Thursday the official news came that Germany has gone into a recession. The goverment is scrambling to revive the economy with a stimulus package, but most German newspapers on Friday remain unimpressed.

After a few years of relative good news on the economic front, Germany has returned to the bad old days of doom and gloom. And the depressing news seems to be rolling in on a daily basis.

The German government hopes to boost the economy with tax breaks. But will it be enough to get the country out of recession?

The German government hopes to boost the economy with tax breaks. But will it be enough to get the country out of recession?

On Wednesday the government's economic panel of experts predicted that Germany's economy would not grow at all in 2009. On Thursday the Federal Statistics Office announced that the country had slid into recession, after the economy shrank two quarters in a row. By Friday that was true for the entire euro zone, with the European Union announcing that the economy of the region, comprised of 15 countries that use the common currency, had also contracted in both the second and third quarters.

The government in Berlin is scrambling to take effective measures to boost the economy, which has been hit by the global economic downturn. On Wednesday Chancellor Angela Merkel's cabinet agreed on the details of a package of tax breaks and investment incentives, including scrapping vehicle registration fees for new cars up until the middle of next year.

The German press, however, remains unconvinced. Most decry the government's measures as too faint-hearted in the face of such enormous economic challenges.

The center-left Süddeutsche Zeitung writes:

"Things will only get better when the global financial crisis begins to wane … But that could take a long time, perhaps even the whole of next year."

"That makes it all the more important that the politicians take decisive counter measures. Reducing the national debt is important, but the politicians should have pursued this aim during the upturn. The government has unfortunately failed to use the good times to remove the mountain of debt. This mistake cannot be straightened out by being stingy now during the crisis. The stimulus package is far too detailed and its scale is far too modest. There has to be more tax relief for companies and workers. The recession is going to be ugly enough, now it's time for the state to take action."

The center-right Frankfurter Allgemeine Zeitung writes:

"The government has tried to take counter measures. However, that seems at best helpless, particularly when one compares its measures with the bailout package for the banks .... In a bid to crank up car sales, the German tax authorities will temporarily scrap vehicle registration tax. But who buys a new car just because they can save a few hundred euros when they fear they may loose their job? The grand coalition's package won't help much but it won't do much damage either. That should not be underestimated, because too big a stimulus program would have pushed up the national debt without achieving many of its goals."

The conservative Die Welt writes:

"It is understandable that Finance Minister Peer Steinbrück is warning against exorbitant spending programs. However, he is suffering from a misconception: one should make savings during an upturn. The government did not do this to a sufficient degree. A state, however, that is too stingy during a downturn only risks worsening and lengthening the crisis …"

"There is a great risk that the government ... is too late and too hesitant in taking measures against weak growth and unemployment. During the election campaign in 2009 there will be great pressure, therefore, to come up with a new package laced with senseless gifts."

"It would be better and cheaper to take the correct action now. Not in the form of billions of euros in extra subsidies to individual sectors but through a reduction of income tax or by scrapping the solidarity tax (a tax levied on all Germans to help development in the eastern states that formerly belonged to East Germany). That would not only be an important psychological signal to the citizens in the midst of the crisis. It would also give the measures enough time to have a beneficial effect on consumer demand."

The Financial Times Deutschland writes:

"The government's ... package for 2009 in no way does justice to the dimensions of the crisis."

"And Foreign Minister Frank-Walter Steinmeier, who is also the Social Democratic candidate for chancellor in next year's elections, is also incapable of seeing the acute danger. Instead of presenting a plan for how the sharp recession can be fought effectively, Steinmeier fantasizes about creating 'the foundations for tomorrow's upturn.' Steinmeier envisages bringing forward European Investment Bank infrastructure projects, starting a research offensive for renewable energies and creating better coordination within the euro zone."

"One has the distinct impression that Steinmeier is more interested in warming up for his election campaign against Angela Merkel than in contributing to the mitigation of the economic crisis."

-- Siobhán Dowling, 1 p.m., CET


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