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Canada Institute - The government's stimulus package is partially damaging the economy

10:42  14 august  2020
10:42  14 august  2020 Source:   de.reuters.com

Italy. Two years after the accident, the new Genoa bridge opened to traffic

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A stimulus package is a package of economic measures put together by a government to stimulate a floundering economy . The objective of a stimulus package is to reinvigorate the economy and prevent or reverse a recession by boosting employment and spending.

What is the economic stimulus package ? Who benefits? How much are you entitled to? Click here to learn everything you need to know! This trillion U. S . stimulus package is the largest emergency relief bill in American history. The bill plans to help people, families, businesses, and the economy

News conference after coalition meetings over stimulus measures in Berlin © Reuters / POOL News conference after coalition meetings over stimulus measures in Berlin

Berlin (Reuters) - According to a study, the federal government's stimulus package in the fight against the corona crisis is partially damaging the economy .

Over 40 billion euros of the planned subsidies are to be viewed critically, according to the study published on Friday by the Kiel Institute for the World Economy (IfW). Around 4.4 billion euros or 2.6 percent of the total package can even be classified as detrimental to the economy as a whole and should be deleted without replacement. These include, for example, the promotion of electric mobility by increasing the purchase premium from 4,000 to 6,000 euros (2.2 billion euros), the fleet exchange programs (0.2 billion) and the bonus program for future investments by vehicle manufacturers and suppliers (two billion).

First government aid funds go to startups

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Obama' s economy stimulus package was passed in February 2009 as the American Recovery and Reinvestment Act. The economic stimulus package ended the Great Recession by spurring consumer spending. Most importantly, it instilled the confidence needed to boost economic growth.

The economic package is crucial for most businesses to stay afloat and comes amid the government unveiling an initial plan to put the virus-savaged economy back to Opposition parties have also been clamouring for a stimulus package to limit the damage to the economy and livelihoods of the poor.

"With the one-sided and massive funding of electromobility, the state disadvantages alternative drive concepts that may later prove to be more advantageous," said IfW expert Claus-Friedrich Laaser. "The bonus program only subsidizes the auto industry and its suppliers, other important economic sectors do not benefit."

As contradicting and therefore inefficient, 14.7 billion euros of the subsidies and thus around 8.8 percent of the total package are quantified. This includes the IfW lowering the EEG surcharge to promote green electricity, financial aid for the preservation of the forests and for the conversion of the aircraft fleets to the latest machines as well as the CO2 building renovation program. "The problem is not the goal of the climate protection measures, but their design," said Laaser. "The promotion of individual technologies or behaviors is not efficient. A uniform CO2 price across all sectors would be far more effective and cost-effective." The authors of the study consider

subsidies of 21.3 billion euros (12.7 percent) to be controversial, as arguments for and against the measures can be found or they could be made more cost-effective. This concerns about the national hydrogen strategy of seven billion euros. "It is critical that the subsidies are only tailored to a specific technology, but the previously one-sided support for electromobility is weakened," said Laaser. "From a macroeconomic point of view, however, funding that is completely open to technology would be preferable."

Trump pledges relocation aid from China .
USA-TRUMP-INDUSTRY: Trump pledges relocation aid from China © Reuters / TOM BRENNER TRUMP PROMISES RELOCATION ASSISTANCE FROM CHINA MANKATO, Minnesota / WASHINGTON (Reuters) - Donald Trump on Monday pledged to create ten million jobs in ten months, in part through tax credits for companies that would relocate industrial activities currently in China to the United States .

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