German lawmakers approve growth package for businesses

A multibillion-euro growth package to boost businesses in Germany, promising tax relief and less bureaucracy, was approved by lawmakers on Friday, but the business community was not impressed with the much-reduced final result.

Originally, the law was intended to be a €7 billion ($7.6 billion) per year all-round package for all sectors, providing relief for companies in the economic downturn and incentivizing investment in climate-friendly measures.

The law was passed in the lower house, or Bundestag, but the federal states in the upper house, the Bundesrat, balked at it and sent it to a mediation committee because they feared the high costs.

The compromise bill passed by the Bundesrat on Friday is for €3.2 billion per year – less than half what was originally on the table.

A once planned state bonus for climate protection investments was scrapped, though tax incentives for research, better deductibility of losses in tax returns and the reduction of bureaucratic hurdles remained. Reporting procedures and accounting obligations are to be simplified and data transmitted electronically instead of via paper.

Finance Minister Christian Lindner, from the pro-business Free Democratic Party (FDP) declared on X, formerly Twitter, that while the package is an important signal, it is not enough.

“Its volume is much smaller than I originally planned.” More must be done to improve Germany’s lacklustre economy, he said, adding: “we are working on it.”

His State Secretary Katja Hessel, also from the FDP, said further steps for an “economic turnaround” with a reduction in bureaucracy, relief and structural reforms for the labour market were already being discussed.

Federal Chancellor Olaf Scholz wrote on X, formerly Twitter that the growth package was an “important sign for our economy and a successful future for the country.” He said it is “good that it’s coming now.”

The law helps companies to invest in research, development and economic growth in difficult times, he said.

German industry was underwhelmed.

“These tax cuts will not provide a noticeable boost to growth,” said the Federation of German Industries (BDI). The package was cut back too much for that and in Germany’s tough competition when it comes to tax policy, this is just a drop in the ocean, the group said.

The German Chamber of Industry and Commerce (DIHK) called for “a concrete reform agenda with relief that will quickly be implemented in everyday business life” before the summer break.

A more positive…