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Germany, France Propose Green Path to Coronavirus Recovery

Posted on May 19, 2020

As Germany faces an €82 billion tax revenue shortfall resulting from the pandemic, it is proposing, along with France, a European economic recovery plan that includes a €500 billion fund and promotes environmentally conscious growth.

The economic recovery fund would be financed through joint borrowing, German Chancellor Angela Merkel and French President Emmanuel Macron said in a joint May 18 statement.

The leaders echoed the May 13 remarks of European Commission President Ursula von der Leyen in saying the coronavirus recovery fund would be added to the multiannual financial framework, the EU’s seven-year budget. The fund should be used to support sectors hardest hit by the pandemic and resulting shutdowns, they said.

In the statement, Germany and France called for a renewed EU growth strategy anchored by the European Green Deal, which aims for the EU to reach climate neutrality by 2050. The countries support introducing a minimum carbon price in the EU emissions trading system, expanding the system across sectors, and increasing the EU emissions reduction target for 2030. They also called for accelerating digitization, including the 5G rollout, increased cybersecurity, digital identity management, fair EU regulation for digital platforms, and an enabling framework for artificial intelligence.

EU lawmakers have been demanding that the 27-member bloc create new own resources, including through the taxing of carbon and plastics, and more robust corporate taxation. In their statement, Merkel and Macron pushed for fair taxation through the OECD digital economy project and a common consolidated corporate tax base.

“Improving the framework for fair taxation in the EU remains a priority, in particular effective minimum taxation and fair taxation of the digital economy in the EU, ideally based on the successful completion of the work of the OECD, and the introduction of a common corporate tax base,” the statement says. To ensure the recovery of the internal market, Merkel and Macron called for a balanced free trade agenda backed by the WTO.

Meanwhile, the Bundesverband der Deutschen Industrie (BDI, or Federation of German Industries) said May 18 that the German government needs to take immediate action to counter the effects of the pandemic-related economic slump.

BDI, which represents 39 industry associations and over 100,000 companies, said the government should reduce the tax burden on companies by temporarily decreasing corporate taxes. It also said the government should expand amortization rules for investments to encourage investment in climate protection and digitization.

BDI warned of an economic slowdown of over 6 percent if the government does not act quickly.

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