German Stimulus Lacks Imagination

The AFP has a decent round-up. Shorter: 50 billion euros in total, of which 18 billion in investments; 9 billion for reducing health insurance contributions and 9 billion for reducing general taxes. Then there's some money for kids and for shredding retiring old cars.

While the tax cuts and reductions in health insurance contributions are not entirely bad, they are not the best way to boost the economy.

At the same time, we are seeing Japan and Korea move aggressively towards creating green jobs:

Japan and South Korea each have announced that they will invest billions of dollars in green projects to create jobs and spur economic growth, in what the United Nations says is the latest sign that its Green New Deal is gaining momentum.

Japan has announced a program aimed at stimulating the economy by promoting measures to curb global warming. Measures announced by Environment Minister Tetsuo Saito Thursday aim to expand the green business market and create up to one million new jobs.

Saito said measures include zero-interest rate loans for environmentally-friendly companies and promotion of the purchase of vehicles and housing with low carbon dioxide emissions.

Now, Germany has a very significant lead in this sector which will not disappear overnight. In a sense, Japan and Korea are starting to do what Germany has been doing since 2000. And a lot of the 18 billion of German investments is going into renovations of schools and universities, which should also be used to make these more energy efficient. Japan is not the best market to export to, though, so it remains to be seen whether the green sector in Germany will benefit from their programme.

Over the course of 2009, it will become clear that the new government spending (now at around €60 billion for two years) is not going to be enough. However, due to the federal elections in September it is going to be nigh-impossible to get much more ambitious (let alone smarter) programmes.

Two things that should still be done is making sure that there is enough money in the programme to reduce carbon dioxide emissions from buildings, and suspending the degression (yearly marginal reduction of the support) of feed-in tariffs for renewable energy.