The rate of VAT on train fares will be cut from 7% to 5% to stimulate rail travel, while the general rate of VAT in Germany will be reduced from 19% to 16%. The lower rates will apply from July 1 to December 31 and will cost the government €20bn.

Local public transport will receive an injection of €2.5bn to help beleaguered operators to weather the huge reduction in travel caused by the coronavirus lockdown and social distancing measures despite running around 80% of services.

There will also be funding for increased use of hydrogen energy and for electric vehicles. From 2021, the Renewable Energy Law (EEG) electricity surcharge will be cut through grants from the federal budget.

The package has been broadly welcomed by Germany’s rail associations. “The economic stimulus package is an important contribution to helping climate-friendly rail through the crisis and strengthening it for the future,” says Mr Dirk Flege, managing director of Pro-Rail Alliance.

“The economic stimulus package strengthens rail in the crisis and thus creates the basis for climate-friendly growth and sustainable mobility in the future,” echoed Dr Ben Möbius, general manager of the German Rail Industry Association (VDB).

State funding

While the two associations welcomed the one-time increase in regionalisation funds of €2.5bn to compensate for the “massive loss of revenue,” they say it is now important that the federal states contribute the same amount.

The Association of German Transport Companies (VDV) estimates that local public transport will lose around $5bn in fare revenue by the end of the year due to the coronavirus pandemic. “This is also due to the fact that during the crisis, significantly more services were offered than would be necessary due to the slump in passenger demand,” the VDV says.

“The public transport rescue package, which was unanimously approved by the federal states at the meetings of the ministers of transport and finance ministers and is now half-financed by the federal government, is imperative,” says VDV president Mr Ingo Wortmann. “We assume that the states will now very promptly initiate an analogous financing of the other half from their own budgets.”

The national economic stimulus package, which chancellor Angela Merkel says is aimed at securing jobs, getting the economy up and running again and includes support for industry, follows the formation of a ‘railway alliance’ between the German federal government, German Rail (DB), and a rail union to agree a financial rescue package for DB in the wake of the coronavirus pandemic.