Plan Approved

Approved on Friday, Feb. 20, the plan includes investments in infrastructure, tax relief, reductions in health care contributions and money for families with children. The package also includes a 2,500-euro bonus to people who junk old cars to buy new vehicles.

The upper house, which represents Germany's 16 states, approved the new plan after its first package was met with criticism both in Germany and abroad. The old plan called for a stimulus of 31 billion euros and was considered too cautious.

Germany's Conservative Chancellor Angela Merkel was full of praise for the new initiative, being touted as a "pact for Germany," which her coalition passed on Tuesday, Jan. 11.

Merkel has said that her government is doing "everything possible so that Germany does not just overcome this crisis, but emerges from it stronger."

Foreign Minister Frank-Walter Steinmeier from Merkel's junior coalition partner, the Social Democrats, said the German package of investments, government loans and hand-outs, and tax cuts, compared favorably with stimulus measures taken by other nations.

"When I look around Europe, I can't see anyone else doing more or taking better steps than we are," he told reporters.

A historic package for an historic slump

With demand for the country's exports crippled by the global financial crisis, Germany's economy entered a recession last year and is expected to shrink by more than two percent this year – marking its worst performance postwar.

The new measures also include 100 billion euros in loan guarantees but the business daily newspaper Handelsblatt reported on Friday that the amount will be insufficient based on preliminary requests alone.

"If we approved all the applications that have been submitted unofficially, the 100 billion euros would be insufficient," a source told the newspaper.

New plan means massive debt

The approved stimulus plan will also force Germany to take on about 37 billion euros in new debt, a fact that displeases the Association of German Taxpayers.

In an official statement, Association President Karl Heinz Daeke called the measures a "smokescreen to distract from [the absence of] true tax relief."

He also criticized the government premium of 2,500 euros to be paid to people who scrap their old cars and buy new ones, saying the auto industry would have benefited more from direct tax cuts.