The German cabinet has agreed to temporarily slash value-added tax and give parents a cash handout of 300 euros per child as part of its 130 billion euro ($147.20 billion) economic stimulus package, a senior government official said on Friday.
Europe’s largest economy has taken after battering after many firms went into lockdown in March to help slow the spread of the coronavirus. The economy is expected to shrink by 6.3% this year – marking its worst recession since World War Two.
Chancellor Angela Merkel’s cabinet agreed at a special meeting on Friday to cut VAT to 16% from 19% for all goods from July 1 until Dec. 31 in a bid to boost consumption – a measure is set to cost around 20 billion euros, the source said.
Both measures are part of a wider package that the German government announced last week and which the DIW institute has said could boost economic output in Europe’s largest economy by 1.3 percentage points both this year and next.