After the Big Slump: A Stimulus Package to Support and Recover the Economy

At the beginning of June 2020, the German government launched a comprehensive economic stimulus package to promote economic recovery. The core components are the temporary reduction in value-added tax to stimulate consumption, support for families, assistance for local authorities, public investment, and programs to promote future technologies and climate protection. The temporary reduction in value-added tax is one of the less convincing elements. On the other hand, measures that promote medium- to long-term investments in future technologies, infrastructure, and climate protection should be welcomed. Measures to stimulate demand cannot solve the problem of limited productivity due to protective measures. In this respect, one should not expect any great growth effects. Nevertheless, it makes sense to support the economy in this critical situation by means of fiscal policy.