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| German government plans tax cuts to boost economy |
| Berlin, 03.06.2025 |
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| The new German government plans to cut taxes to help kick-start economic growth. Finance Ministry spokesman Maximilian Kall said on Monday, adding that the cabinet would like to take the necessary measures soon. TASR reports this based on an AFP report.
Kall told reporters that the government is considering new tax breaks for research, investment and the production of electric cars, as well as a one percent annual cut in corporate income tax for five years from 2028. The aim is to support the economy, stimulate growth, secure jobs, support companies and mobilize investment, he said.
The German economy is struggling to recover from a persistent downturn. Europe's largest economy has been hit by high energy and labor costs in its domestic market, as well as increasingly tough competition from China and new trade barriers imposed by US President Donald Trump.
The government in Berlin is officially forecasting zero gross domestic product (GDP) growth this year, with a slight decline in 2023 and 2024.
Kall added that the cabinet would consider proposals for the measures on Wednesday (June 4). “Intensive discussions” are currently underway with the aim of getting them approved by parliament before the summer recess, he said.
On Saturday (May 31), the business newspaper Handelsblatt reported that the government had estimated the cost of the measures at 17 billion euros per year until 2029.
Robin Winkler, chief economist at Deutsche Bank, said the plan would provide “a welcome short-term stimulus for the manufacturing sector, but its impact on facilitating the broader structural transformation of the German economy is likely to be limited.”
The new German government, led by conservative Chancellor Friedrich Merz, also plans to spend 500 billion euros over the next 12 years to modernize Germany’s infrastructure and provide further support to the economy.
But some economists have warned that a one-off spending package alone may not boost long-term economic growth. They say reforms are also needed and the money should be spent wisely.
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