Extended Work Hours Advocated by Laschet, Alongside Proposal for VAT Reduction
In the ongoing debate about extending economic stimulus measures within the EU, a divided stance is emerging. Armin Laschet, the CDU leader and North Rhine-Westphalia's Minister President, has expressed hesitancy towards prolonging certain temporary economic relief measures, such as value-added tax (VAT) reductions and short-time work allowances.
Laschet's position is rooted in concerns about fiscal sustainability and the potential long-term distortions these measures could cause in the labor market and public budgets. However, the German government under Laschet's leadership has still implemented significant fiscal stimulus to support domestic demand and partially offset sluggish growth and weak exports in the eurozone.
Regarding VAT reduction, there is debate about its effectiveness versus cost and complexity. Laschet's position leans towards ending such temporary VAT cuts to restore regular tax structures. On short-time work allowance ("Kurzarbeit"), a labor market policy heavily used during the COVID-19 crisis, Laschet appears inclined to phase it out gradually, emphasizing a return to normal labor market conditions and labor mobility.
The broader EU debate also considers economic conditions such as slowing inflation close to or below target, easing inflationary pressures, and the need for monetary policy adjustments. These factors reduce the immediate need for aggressive fiscal stimulus extensions but require balanced regional and sectoral responses.
While some EU countries advocate for extending reduced VAT rates to maintain consumer demand, Germany, under Laschet's influence, advocates a measured approach focusing on fiscal sustainability. The extension of economic stimulus, including VAT reductions and short-time work allowances, remains uncertain and is shaped by national political stances like Laschet's cautious approach, ongoing economic data, and EU-wide fiscal coordination discussions.
Meanwhile, economic experts predict that growth could pick up again in 2021. If this trend continues, the Federal Employment Agency expects unemployment to reach three million for the summer. Previously, Alexander Dobrindt, the head of the CSU group in the Bundestag, called for an extension of the current regulation for short-time work allowance beyond 2020. However, Laschet has emphasized the importance of the speed of economic impulses, suggesting that investments should be made soon to take advantage of current benefits. He believes that these measures are intended to stimulate the economy and trigger short-term impulses, and no one should expect an extension of the value-added tax reduction and short-time work allowance.
[Image: Shelves in a supermarket, via dts Nachrichtenagentur]
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