German Cabinet OKs Stimulus Plan To Trigger EUR50 Billion Invest

German Cabinet OKs Stimulus Plan To Trigger EUR50 Billion Invest

BERLIN -(Dow Jones)- The German cabinet Wednesday approved a growth stimulus plan that will trigger roughly EUR50 billion in investments in 2009 and 2010.

The government aims to cushion Europe's largest economy against the severe slowdown caused by the global financial crisis and hopes that the plan will safeguard 1 million jobs.

"The government measures will foster investments and orders for companies, private entities and local government and are worth around EUR50 billion for the years 2009 and 2010," said the 15-point plan "Ensuring Employment by Strengthening Growth." "Measures to safeguard companies' financing and liquidity are provided by funding investments worth slightly more than EUR20 billion."

The measures will provide incentives for public and private investment, creating the right conditions for a quick recovery from economic weakness, said the government.

"In the light of the global economic slowdown as a result of the serious crisis in the global financial markets, the government regards it as its priority task to continue safeguarding growth and employment," the plan states. "The government's package of measures approved today creates the prospect a quickly overcoming the weakness in growth and for safeguarding jobs."

Finance Minister Peer Steinbrueck said Tuesday that the government's new debt requirement will be higher next year than the EUR10.5 billion penciled in the 2009 draft budget.

The government will fund the measures by increasing net new borrowing and it will take into account "to the full extent" any lower revenue or higher spending caused by the economy's performance.

As a part of the package, state-owned KfW Banking Group will provide an additional financial instrument with a volume of up to EUR15 billion that aims to boost commercial banks' lending capacity, with the measure limited until the end of 2009.

The package also includes better conditions for companies to write off investments, providing financial help for home renovations to improve greenhouse emission levels, boosting infrastructure programs and more spending on urgently needed transportation investments.

Under the plan, private households will be allowed to offset bills from skilled workmen to a greater extent.

In addition, the government plans to help the ailing car sector by suspending the motor tax on environment-friendly cars until Dec. 31, 2010. It will also urge the European Investment Bank to increase loans for research, development and innovation projects for modern vehicle technology to EUR10 billion in 2009, compared with EUR7.2 billion in 2007.

The government also aims to safeguard jobs by increasing qualification programs for low-qualified and older employees and by paying benefits for 18 months for short-term work instead of the current 12 months.

Steinbrueck and Economics Minister Michael Glos are due to present the plan 1115 GMT.