June 3, 2020 / 10:42 AM / 2 months ago

German coalition parties try to unblock stimulus impasse

BERLIN, June 3 (Reuters) - German Chancellor Angela Merkel’s ruling coalition on Wednesday resumed negotiations on a massive stimulus package, after party leaders failed to bridge differences over cash incentives to buy new cars and extra relief for highly indebted municipalities.

Members of Merkel’s conservative bloc and the centre-left Social Democrats (SPD) convened in the chancellery on Wednesday morning and talks were expected to extend into the afternoon or evening, coalition sources said.

The package is expected to include up to 100 billion euros ($112.16 billion) of measures to help firms and workers rebound from the coronavirus crisis, which is set to plunge Europe’s largest economy into its deepest recession since World War Two.

It comes on top of a 750 billion euro rescue package agreed in March.

SPD Finance Minister Olaf Scholz wants the stimulus measures to be “timely, targeted, temporary and transformative”.

Among the proposals on the table are cash handouts for families to boost consumption, extra relief for municipalities struggling with lower tax receipts, and further funds for companies with fewer than 250 employees.

Economy Minister Peter Altmaier, a conservative, has suggested additional support for the auto industry, including subsidies for environmentally friendly technologies and cash incentives to buy new cars with zero or low carbon emissions.

But SPD leaders insisted on Tuesday that any cash-for-clunkers programme must exclude vehicles with combustion engines as this would undermine Germany’s climate protection goals.

Scholz wants to help municipalities, in charge of a large chunk of public investment in Germany, with a cash injection worth 12 billion euros to compensate for plunging tax revenues, plus relief for heavily indebted towns worth 45 billion euros.

The conservatives oppose debt relief for municipalities, but have signalled a willingness to help towns with other measures such as more federal funds for schools and roads.

$1 = 0.8916 euros Reporting by Michael Nienaber and Christian Kraemer; Editing by Catherine Evans

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