Germany: Paying people to buy cars is absurd

Bernward Janzing

die tageszeitung

Who’d have thought that car sales could boom in the depths of a recession? asked Bernward Janzing. Dealerships across Germany are crowded with eager buyers, and sales soared by 21 percent in February—thanks to a government stimulus program that offers $3,500 to anyone with a car more than nine years old who decides to scrap it and buy a new or nearly new one.

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The program is so popular that the $2 billion set aside is running out. And it’s increasingly clear that the whole idea is “crazy.” The state is running up massive debts without even necessarily benefiting German businesses: Small Asian cars are selling better than BMWs. The subsidy is billed as “environmental,” because newer cars emit less carbon dioxide, but that’s ridiculous. We’d be much better off subsidizing public transportation. And though it’s popular now, it’s unlikely to remain so. Encouraging people to splurge on new cars could easily lead to a rash of personal bankruptcies.

The worst of it is that subsidies are addictive, and there’ll be tears when the time comes to wean people off them. Chancellor Angela Merkel has already had to extend the program, and with an election coming up in autumn she may be reluctant to end it. “The genie is out of the bottle, and it’s going to be hard getting it back in.”