Germany Won't Expand Its Cash For Clunkers Program

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Germany will not extend its version of cash for clunkers. It can’t afford to continue giving the auto industry a gift just to pump up car sales.

The government set aside $7 billion to aid automakers and drivers. That money is almost tapped and Germany doesn’t want to go further into debt just to delay the inevitable drop in car sales.

AP – BERLIN -The German government on Wednesday ruled out pouring extra money into a popular car-scrapping bonus program that has boosted auto sales, amid signs that the €5 billion ($7 billion) fund will soon be exhausted.

The €2,500 bonus for people who get rid of cars at least nine years old and buy new ones was introduced earlier this year in an effort to boost the auto industry — a key part of Germany’s recession-hit economy.

In April, the government decided to expand the program’s funding to a maximum €5 billion from €1.5 billion and said it would finish by the end of the year. The program has been credited with boosting car sales strongly in recent months.

This week, some members of the Social Democrats — the centre-left half of conservative Chancellor Angela Merkel’s “grand coalition,” which both partners hope to end in Sept. 27 elections — called for more funding if demand remains strong, in order to ensure that the program runs for the rest of 2009.

Government spokesman Thomas Steg on Wednesday acknowledged signs that “this €5 billion pot will be exhausted in September.”

“Then we will have confirmation that the … bonus has been a major success, but the sum will not be increased again,” he told a regular government news conference. “The €5 billion ceiling stays — there will not be one cent more.”

Critics have portrayed the program as a dubious election-year gift to voters, arguing that it benefits auto makers at the expense of sales in other industries and may just delay a slump in car sales.

Officials say they have received nearly 1.72 million applications for the bonus. The current funding is enough to cover 2 million cars.

“The auto industry is waiting on the bonus like a drug addict waits for the next shot,” Steffen Kampeter, a senior lawmaker for Merkel’s Christian Democrats, was quoted as telling the Financial Times Deutschland newspaper.

“It should instead put forward concepts on how it plans to deal with the structural challenges for the industry.”

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