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IfW: Subsidies rise to maximum level – reduction urgently needed | message


KIEL (dpa-AFX) – From the point of view of the Kiel Institute for the World Economy (IfW), Germany should significantly reduce government aid for the economy. This is urgently needed in order to finance part of the Corona aid, said President Gabriel Felbermayr on Monday when the IfW subsidy report was presented. According to the budget, the subsidies in 2020 will rise by almost 8 billion euros to a high of 206 billion. An annual saving of ten billion euros is realistic, said Felbermayr. According to the IfW, the sum mentioned does not include the state aid of 72.6 billion euros arising in the course of the Corona crisis.

As can be seen from the information, the financial aid from the federal government will increase in 2020 compared to the previous year – by 7.5 percent to 63.8 billion euros. With a plus of 1.8 billion euros, the expenditure of the energy and climate fund increased the most. The tax breaks increase slightly to 66.5 billion euros. According to IfW estimates, financial aid from the federal states and municipalities will amount to 69.1 billion euros this year. In addition, there are EU subsidies for agriculture (4.9 billion euros) and financial aid from the Federal Employment Agency (0.7 billion).

According to its own statements, the IfW defines the term “subsidy” much more than the federal government. Their subsidy report shows, for example, in the case of federal financial aid with 14.5 billion euros, just under a fifth of the sum calculated by the IfW.

“In the end there is a justification for every single subsidy,” said study author Claus-Friedrich Laaser. “But overall, funds tend to be distributed from structurally strong to structurally weak sectors and regions.” As a rule, only individual interest groups benefited from this; overall economic growth, innovative strength and welfare suffered.

In order to prevent social conflicts, individual subsidies should not be completely abolished. The IfW proposes cutting all subsidies classified by the institute as “harmful to the economy as a whole” by 20 percent. All “principally justifiable” subsidies should be capped by 10 percent. This would give the federal government almost 10 billion euros in additional financial leeway each year.

The IfW identifies aid totaling 21.7 billion euros as “harmful to the economy as a whole”. These included 2.4 billion grants for agriculture, the sales tax reduction for hoteliers (1.6 billion) and the promotion of electromobility (0.85) ./ wsz / DP / stw

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