Cash-back for clunkers

With the auto industry apparently turning a corner after the recent recession, some politicians in Germany's coalition government are calling on the car industry to pay them back for last year's car scrapping subsidy.

"Considering the growing profits, the auto industry should help cover the costs of the car scrapping scheme," Christian Democrat budgetary expert Alexander Funk told the mass-circulation newspaper Bild on Tuesday. "The German government should make suggestions as to how a just financial contribution from the entire industry could be arranged."

The German government poured five billion euros ($6.6 billion) into its car scrapping subsidy, vying to fend off free-falling car sales after the economic downturn and helping to enable the sale of two million new cars.

Under the scheme, Germans could trade in cars that were at least nine-years old for a brand new one and pocket 2,500 euros from the government for their old car in the process - regardless of its real value.

Turning the corner

"The car industry was the great profiteer from the car scrapping scheme, while the taxpayers carried the costs," Free Democrat financial expert Daniel Volk said, agreeing with his Christian Democrat coalition colleague Funk. "It is time for the car sector to take on a portion of the costs."

Volk called on leading Social Democrat politicians Sigmar Gabriel and Frank-Walter Steinmeier, who are currently in the opposition, to organize the repayment. He called them "the fathers of the car scrapping scheme," and said they should use their "well-known, good contacts to VW and Opel" to help grease the wheels. The Social Democrats were the junior partners to the Christian Democrats in Chancellor Angela Merkel's government coalition when the program was introduced and carried out.

The car scrapping scheme's viability was a frequent talking point in Germany. The government initially referred to it as the "environment bonus," until critics pointed out that the ecological costs of scrapping working cars and building new ones far outweighed any slight gains in carbon dioxide emissions on the road.

However, as a means of helping boost car sales, its efficacy was less frequently questioned. The subsidies, however, were given to car buyers, not car companies, which could complicate any governmental bid to call for repayment from the industry.

Author: Mark Hallam (AFP, dpa, Reuters)
Editor: Nancy Isenson