The World From Berlin: 'Consumer Doping' - DER SPIEGEL
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The World From Berlin 'Consumer Doping'

Some German politicians want to copy Washington's formula for spurring consumer spending: cut taxpayers a check for $500. But media commentators argue this is a dangerous prescription for the ailing economy that could backfire.
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As German politicians scramble to signal to voters that they're doing everything they can to help stimulate the economy, one idea is receiving an especially large amount of attention -- most of it negative.

In addition to a €31 billion ($39 billion) economic stimulus package already announced, politicians from the ruling coalition of Christian Democrats (CDU/CSU) and Social Democrats (SPD) are exploring other potential measures  to ramp up consumer spending. SPD vice-chairwoman Andrea Nahles of the party's left-wing, and health expert Karl Lauterbach have presented a plan to distribute consumption vouchers worth €500 to all German adults.

The vouchers would function like coupons -- they would have to be spent to be used -- and consumers would first have to dole out €200 of their own money on purchases in order to activate them. In comments to reporters, Nahles said the vouchers would help strengthen German domestic consumption at a time when exports are hurting.

Resistance to the proposal has been sharp and has come from all sides, including Nahles's own party. Rainer Wend, an economic policy spokesman for the SPD, told reporters he was "very skeptical" of the plan and worried that even discussing it would have an adverse impact on consumer spending right now, potentially causing Christmas buyers to delay their purchases in the hope of receiving a government voucher later.

Criticism from conservatives has been even stronger. Economics Minister Michael Glos, who belongs to Merkel's conservative party, said that consumer vouchers were "a nice gift idea" but that they would do nothing "to solve our real economic problems."

Commentators in the German media have, if anything, been even more dismissive. Few believe that sending off €500 checks will provide anything more than temporary relief, and several newspapers worry that relying on consumer spending to get out of the crisis is a dead end in Germany, whose citizens are famed for their thrift. Writing out checks may be a favorite trick of politicians in the US -- who issued the $300 tax rebate in 2008 that appears to be the model for Nahles' proposal -- but so far Germans have reacted to the idea with contempt.

The center-right Frankfurter Allgemeine Zeitung writes:

"The economic stimulus miracle workers are here. They come bearing vouchers. Now everyone, from children to senior citizens, can go Christmas shopping on the government's tab with a €500 voucher -- and overnight the phantom of dark economic news will disappear from the billions spent. Consumer doping? Even those who, on account of the bleak outlook, are inclined to see the expansive state-as-savior in a new light should reject a debt-financed buying spree. Precisely because this crisis will last longer and go deeper than previous downturns, such spectacular night-time raids are little help. Nothing is gained if private consumption is momentarily lit up by the state and then once again collapses. And that's entirely separate from the danger that the debate over state Christmas presents might already have inspired -- that it might kill the rest of the considerable consumer-lust that already exists and induce the citizenry to adopt a wait-and-see approach. With vouchers (the government) squanders its political capital on something actually motivated by social concerns, capital that would better be spent on long-term tax cuts. These are what the country needs to motivate strength and to quickly emerge from the crisis."

The business newspaper Financial Times Deutschland writes:

"That the stimulus debate is increasingly degenerating into absurdity is first and foremost the fault of the chancellor. As soon as Angela Merkel made it clear at the beginning of the week that "all options" were on the table, parliament turned into a fun fair of suggestions. As usual, Merkel is letting the debate drift. And it's becoming increasingly clear that economic arguments are counting for less than tactical ones."

"Unlike with the bank bailout, it has become apparent that coalition partners want to abuse the stimulus-debate in order to distinguish themselves in their respective spheres. If nothing else, the fight now over whether tax cuts or consumer vouchers are the best tool is following ideological motives -- and that depends on which voting bloc (the parties) would most like to relieve."

"Nothing would be more dangerous for the struggle against recession than an ostentatious and dogged campaign fight over the correct strategy. Merkel has promised that the government will react with 'lightning speed' when necessary. And the head of the Social Democrats has even assured that his party will handle the problem with 'super lightning speed.' Regardless which politician formulates the prettiest superlative, what is critical now is that they keep their promise."

'Germans Cannot Be Transformed into Americans'

The leftwing Tageszeitung writes:

"It's not only the crisis that Germany has picked up from the USA. Now the counteractive measures are also being imported from there."

"Yes, consumer vouchers can be a tool of economic policy. They may well serve to attenuate the crisis. But supporters should also get straight about the limitations of their concept. One question poses itself immediately: Who should get the money?"

"There's little sense in spraying around €40 billion with a watering can. Whoever mobilizes so much money and has to put up with the corresponding state debt ought to employ the tool in a targeted way. That means: people who make €6,000 per month don't need any consumption vouchers. Neither do millionaires. The gold should only be permitted to flow to those who are strapped for cash. Those on welfare, low-wage earners and part-time workers will spend every extra euro. If we want to effectively combat the recession that's beginning, we will give support to these people."

The center-left Süddeutsche Zeitung writes:

"At the heart of the debate over giving out consumption vouchers is the attempt to rapidly convert Germans into Americans, to transform savers into spenders ... We should take note, because the trick that is supposed to magically turn all of Germany into a shopping mall could cost public authorities as much as €40 billion."

"This (might make sense) if the checks gave Germans a lasting urge to consume more and swarm into shops after being fattened up by the state. But even the recent boom years didn't manage to arouse such a buying spree. Quite the contrary: As exports grew, the Germans continued to diligently save as much as ever. More consumption? 'System error.' Of all times, now is the wrong one to face this, when the bad news from business piles up every day, when the number of bankruptcies is climbing and when many people are fearing for their jobs. It would also be undesirable if the Germans behaved like Americans and financed their lives on the fly, or if they ignored the warnings of politicians and economists to take solid private precautions to save for old age. Such precaution would, paradoxically, be even more necessary after the checks were paid out. For the state would later have take the €40 billion back from the same people that would now be getting it -- in the form of higher taxes and new cuts in social spending."

"On top of that, the announcement of such vouchers would at first inhibit consumption. Everyone who was already going to buy a new TV, washing machine or computer would first wait for his voucher and go shopping later. This mechanism is well known to economists -- they call it 'attentism.' In the middle of the Christmas shopping season, even just debating consumer vouchers poses a real danger for retailers."

-- Christopher Glazek, 13:30 CET