Merkel Coalition at Odds on Stimulus to Offset Virus Impact

(Bloomberg) -- Divisions within Chancellor Angela Merkel’s ruling coalition were laid bare Tuesday when top officials disagreed publicly about the need for a stimulus package to offset potential economic damage from the coronavirus.

Ralph Brinkhaus, the head of Merkel’s parliamentary caucus, said it’s “much too soon to talk about a crisis” and warned against talking down the economy. That came just hours after Alexander Dobrindt, the deputy caucus leader and a member of the Bavarian branch of Merkel’s bloc, proposed using Germany’s budget surplus to fund a stimulus package.

“We have to be in a position to act, for example on the issue of cash for short-term work” in case factories are forced to halt because of disruptions to supply chains, Brinkhaus told reporters in Berlin before a meeting of the CDU/CSU caucus. “It’s much too soon to talk about being in a crisis. You can talk such crises into happening. We have a strong economy in Germany, and we’re counting on it.”

The comments added to the sense of confusion about the government’s response to the coronavirus, which threatens Germany’s export-reliant economy at a time when it’s already mired in a manufacturing slump. Discussions around a boost in spending have gathered pace in recent months after Germany narrowly avoided recession last year.

Finance Minister Olaf Scholz, a member of Merkel’s Social Democratic coalition partners, has resisted calls for a spending boost, while saying the money is there if needed. Economy Minister Peter Altmaier, a member of the chancellor’s CDU party, on Monday reiterated that he wants to discuss stimulus measures with Scholz, including possible corporate tax relief.

Dobrindt raised the prospect of making as much as 50 billion euros ($56 billion) available this year and said measures will be discussed this Sunday by the ruling coalition. He backed Scholz in ruling out a loosening of rules that limit government borrowing.

Rolf Muetzenich, the head of the SPD caucus, suggested bringing forward the abolition of a levy to help fund the rebuilding of the former Communist eastern states, the so-called “Solidarity Tax.”

“That’s a simple measure and could offset any dip that we’ll have in growth,” he told reporters, repeating SPD demands for a significant increase in spending.

“We want very strong investment that on the one hand has an impact on the economy, but especially puts the regions and the local authorities in a position to invest,” he said.

©2020 Bloomberg L.P.

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