Germany’s government launched a comprehensive economic stimulus programme featuring tax relief for businesses, aiming to reverse two consecutive years of contraction and counter projected stagnation in 2025, according to AP News.
Chancellor Friedrich Merz’s cabinet approved the “growth booster” initiative on Wednesday, which requires parliamentary ratification before implementation.
The package’s centrepiece introduces substantial tax write-offs for investments in machinery and equipment during 2025-2027, followed by a phased reduction of corporate tax rates from 15% to 10% between 2028 and 2032.
Additional measures include tax breaks for companies purchasing electric vehicles over the next 30 months and enhanced incentives for research and development investment. Finance Minister Lars Klingbeil emphasised the strategic objective, stating:
We are making Germany as a location more competitive internationally.
The intervention targets Germany’s position as Europe’s largest economy, which shrank by 0.3% in 2023 and 0.2% in 2024 amid energy crises and industrial slowdown. Industry associations immediately called for further support, particularly regarding high electricity prices impacting manufacturing competitiveness.
This tax programme operates separately from a previously approved €500 billion ($570 billion) infrastructure fund, which Merz’s coalition secured parliamentary approval for before taking office last month. That fund will finance transportation, digitalisation, and energy transition projects over twelve years.
The cabinet aims to fast-track parliamentary approval of the growth booster package before the summer recess.
