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BERLIN/ISTANBUL

The federal Cabinet in Germany Wednesday approved the first tax cut package of €46 billion (approximately $52.3 billion) to ease the burden on the struggling economy.

The package will be implemented in the 2025-2029 period in order to support companies and revitalize the struggling economy, according to a statement by the German government.

The tax package aims to increase priority investments with advantageous options such as “super depreciation” of 30% per year for 3 years to ease the tax burden of businesses.

A 1-point reduction in corporate tax is planned for 5 years starting from 2028. In addition, tax incentives will be increased for mobility and research and development (R&D).

On the other hand, tariff wars and some statements by US President Donald Trump have fueled concerns about global trade, with most analysts seeing Trump's tariff policy as a “special risk” to German economic growth.

While Trump's aggressive tariff policy casts a shadow over the global economic outlook, the German economy, which depends more heavily on the manufacturing sector than other countries in the region, remains vulnerable to persistent weakness in production.

The country's economy contracted by 0.2% in 2024 compared to the previous year. It was the second consecutive year of contraction as increased competition with China and structural problems curbed the economy.

On April 24, the government lowered its growth forecast for this year, which was previously announced as 0.3%, to zero due to the impact of global trade tensions following Trump's policies.

If the government's latest forecast comes true, the country's economy will not grow for the third consecutive year.

The German Council of Economic Experts, which advises the government, also lowered its 2025 growth forecast for the economy from 0.4% to zero on May 21.