Germany's new government launches a program to encourage investment and boost the economy

Key Points

• Chancellor Merz's Cabinet approved a growth booster program offering tax breaks and eventual cuts to revive Germany's economy, which has shrunk for two years and is expected to stagnate.
• The plan includes a hefty tax write-off on machinery and equipment investments over the next three years and a phased cut of the corporate tax rate from 15% to 10% between 2028 and 2032.
• Additional incentives cover 2½-year tax breaks for companies purchasing electric vehicles and measures to spur research and development spending.
• This stimulus package is distinct from a previously approved €500 billion infrastructure fund, with legislation for that fund set to be introduced in late June.

BERLIN (AP) — Germany's new government on Wednesday launched a package of tax breaks and eventual tax cuts for companies, moving to encourage investment as it tries to give new momentum to an economy that has shrunk for the past two years and is expected to stagnate this year.

Chancellor Friedrich Merz's Cabinet approved the so-called growth booster program, which must still be passed by lawmakers. Its central component is a hefty tax write-off on investments in machinery and other equipment over the next three years, followed by a gradual reduction of the corporate tax rate from 15% to 10% between 2028 and 2032.

There will also be tax breaks over the next 2½ years for companies that buy electric cars and measures to encourage investment in research.

Finance Minister Lars Klingbeil, who is also the vice chancellor, said that “we are making Germany as a location more competitive internationally.” Germany has Europe's biggest economy.

Several industry associations have already called for more help, for example, in bringing down electricity prices.

The package launched Wednesday is separate from a 500 billion-euro ($570 billion) fund that Merz's coalition pushed through parliament before it even took office last month to pour money into Germany’s creaking infrastructure over the next 12 years.

Klingbeil said that the government plans to launch legislation formally setting up that fund in late June.