Corona crisis: Federal Council decides on stimulus package

In the morning, the Bundestag had approved important points, and now the billion-euro economic stimulus program has also been approved by the state chamber – unanimously.

The Corona economic stimulus package was unanimously approved by the Federal Council on Monday morning. Previously, the Bundestag had decided on important parts of the economic stimulus package, consumer spending and the economy Corona-Krise should crank again. Parliament approved the changes on Monday in a special session with the votes of the grand coalition. All points of the program can now take effect on July 1st.

A cut in VAT is said to be due to the corona pandemic and Short-time work strengthen weakened purchasing power again. By the end of the year, instead of 19, there would only be 16 percent VAT on purchases. The reduced rate, which applies to many groceries and everyday goods, is reduced from 7 to 5 percent.

Many supermarkets, car and furniture stores have already announced that they will pass the savings on to their customers – in some cases, prices were reduced at the beginning of the week.

The opposition nevertheless criticized the temporary tax cut as largely ineffective. It means an “absurd bureaucratic effort” for the retail trade, and at the same time an average household saves just 30 euros a month, said FDPGroup Vice-Christian Dürr. Left and Greens doubted that the savings would really reach the consumer. It was a daring, unpredictable bet. Also the AFD doubted economic stimulus.

300 euros child benefit for families

The second major component of the stimulus package is a bonus of 300 euros for each child entitled to child benefit. The first 200 euros are to be paid with child benefit in September, the remaining 100 euros in October. The child bonus is not counted towards the basic security, but is offset against the tax-free child allowance for higher earners, so that families with less money benefit in particular.

There are further facilities for companies, for example through changed depreciation rules. In addition, they should be able to offset current crisis-related losses better with profits from the previous year and thus have more money in the checkout in difficult times.

The federal government bears most of the costs for the economic stimulus package: Almost 13 billion euros in tax losses will result from the reduction in VAT, and the children’s bonus will add another 5.4 billion euros. To solve this, Finance Minister wants Olaf Scholz (SPD) take out more loans. In the meantime, record debts of 218.5 billion euros are planned for 2020. The Bundestag is scheduled to adopt the second supplementary budget later this week.

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