Industry Rescue

Berlin plans "targeted measures" to boost the German economy but aims to avoid a nationwide stimulus package, government spokesman Thomas Steg said Monday, Oct. 20.

Chancellor Angela Merkel told the economy and finance ministers to develop possible ways of aiding industries hit hard by the effects of the global financial crisis by November, Steg said.

"The chancellor spoke out (at the Cabinet meeting) specifically against a vague, traditional, wide-ranging credit and economic program financed by new borrowing," Steg said at a press conference. "What could be helpful in this situation are very precise, very targeted measures to stimulate investment for certain industries."

Steg added the measures would have to be "convincing, affordable and, first and foremost, able to be put into place quickly."

The Cabinet will then decide which measures are appropriate while drafting up its 2009 budget, which is due to be finalized next month, Steg said.

Automakers could see aid

Media reports said on Monday that the measures being considered included tax breaks for low-emissions cars and state guarantees on loans to small and medium sized companies. Steg said no specific measures were discussed by the cabinet on Monday but added that carmakers would receive close attention.

"From the chancellor's point of view, the automobile industry is a very important branch because it still has a superior position in terms of employment," Steg said.

The industry has also requested state support.

"The uncertainty of consumers has been increased by the financial crisis," said Eckehart Rotter, a spokesman for the German Automobile Association (VDA). "Something has to be done to work against that and strengthen consumers' confidence."

SPD wants job protections

German Foreign Minister Frank-Walter Steinmeier, who is also the Social Democratic Party's candidate for the chancellery in next year's elections, said on Sunday that Germany should implement programs to protect jobs.

While he did not explicitly endorse demands that the government launch a stimulus package, he said measures in addition to bank rescue were necessary to protect German workers.

"There's a bumpy road ahead of us," he said at a meeting of the SPD, which governs in a grand coalition with Merkel's Christian Democratic Union, "After the rescue shield for the banks, we need a protective shield for jobs. The job's not done with the financial rescue. The crisis will hit the economy. How hard and for how long depends on us."

Economy languishing

The moves came ahead of an announcement on Monday from the German central bank that Europe's largest economy had likely stagnated in the third quarter of 2008.

In the second quarter of 2008, German gross domestic product (GDP) shrank by 0.5 percent on a quarterly basis and a number of economists had been forecasting a further drop in the third quarter.

The technical definition of recession is two consecutive quarters of negative growth.

German Economy Minister Michael Glos last week cut his 2009 growth outlook to just 0.2 percent, a fraction of the previous forecast of 1.2 percent.

Other economic institutions, however, were more pessimistic. Deutsche Bank said Germany's economy would shrink by 1.5 percent in 2009, according to a report in the Financial Times Deutschland.