Read news from:
Austria
SHARE
COPY LINK

ECONOMY

Funds for car scrapping scheme running out

The budget for Germany’s popular Abwrackprämie, or car scrapping premium, could be exhausted before parliamentary elections in September, daily Bild reported on Tuesday.

Published: 7 July 2009 10:36 CEST
Funds for car scrapping scheme running out
Photo: DPA

According to new numbers from the Federal Office of Economics and Export Control (Bafa), the remaining money in the scrapping bonus fund is only enough for some 300,000 new car purchases.

A Bafa spokesman told the newspaper that the government is logging between 7,000 and 8,000 new applications for the scrapping bonus each day. If heightened demand keeps up, the programme’s budget could run out before this year’s parliamentary elections on September 27.

Meanwhile, Saarland Social Democratic leader Heiko Maas suggested extending the scrapping programme through the end of the year.

“Everyone benefits from the Abwrackprämie – consumers, employees and the economy,” he said. “That’s why we need to see whether, regardless of reaching the fund’s limit, anyone who scraps his old car before the end of the year should receive the €2,500 bonus in full.”

Altogether the German government has allocated €5 billion for the programme, enough to fund the €2,500-subsidy for 2 million new cars. The German cabinet already extended the car-scrapping bonus once in April, earmarking a further €3.5 billion for the programme and extending its expiration date from May until the end of the year.

The German Association for Motor Trade and Repair (ZDK) is warning the government against a renewed increase of the program’s budget.

“The Abwrackprämie should not be extended again,” ZDK spokesman Helmut Blümer told Bild. “We fear a drop in sales for 2010 anyway – this would make it even bigger,” he added.

The scrapping bonus is a controversial issue for German citizens as well. According to a poll by the GfK research institute, 39 percent of Germans see the economic stimulus measure in a positive light, whereas 37 percent view it unfavourably.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

SHOW COMMENTS