GroKo package falls short of possibilities

As good as the federal government's economic stimulus package may seem, more could have been achieved with the sum involved. An analysis by Sebastian Dullien.




4. JUNE 2020



It is gratifying that the German government has agreed on an economic stimulus package of considerable scope. The package contains a number of sensible elements, and at first glance it also appears to have an appropriate volume. On closer inspection, however, it falls short of what could have been achieved with the total sum indicated.

The individual items on investments, support for climate change, e-mobility and research and development, relief for companies in terms of electricity costs, and support for the cultural sector, for example, contain a great deal of useful information, often on a sensible scale. Many of the projects mentioned there can be found in the same or very similar form in the report that the IMK, together with the DIW, the FÖS and the IFSOE, prepared on behalf of the Federal Environment Ministry and presented in mid-May (for example, on energy-efficient building refurbishment, the promotion of hydrogen technologies and charging infrastructure, the Digital Pact or early childhood education). This is all good and sensible for the perspective social-ecological transformation of the German economy. However, a relevant part of these points is unlikely to have an economic impact until 2021 at the earliest.

In the area of local government, it is encouraging that the federal government will in future assume a larger share of the costs of housing in the basic social security system. Beyond that, however, the relief for the municipalities is not sufficient. The municipalities will only be relieved of the foreseeable loss of revenue from the trade tax in 2020. The additional costs from the Infection Protection Act and the revenue shortfalls in 2021 as well as the revenue shortfalls from other taxes will remain with the municipalities and are likely to weaken their financial and investment strength. Disappointingly, no agreement was reached on the long pressing issue of debt relief for municipalities with high levels of old debt. In the upswing, this problem was less pressing; in the downturn, the new social expenditures are likely to burden the municipalities to such an extent that many will have to curb their investment plans.

On the author: Prof. Dr. Sebastian Dullien is Scientific Director at the Macroeconomic Policy Institute (IMK).



The Corona pandemic poses new kinds of challenges for global economic and social policy making and has further intensified an already existing need for action. Economists are working hard on mitigating the economic effects.