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Bonus funding expands

THE German government decided yesterday to expand funding for a popular car-scrapping bonus that has given auto sales a powerful boost, more than tripling the amount of money originally set aside for the plan.

Chancellor Angela Merkel's Cabinet agreed to cap funding for the program at 5 billion euros (US$6.7 billion) - up from the 1.5 billion euros originally set aside.

Merkel's spokesman, Ulrich Wilhelm, said the new funding level would cover 2 million cars, compared with 600,000 previously.

The 2,500-euro bonus for people who scrap 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 economy, which went into recession last year. It was part of a wider 50-billion-euro economic stimulus plan.

A German auto industry group said last week that new car registrations in the country in March soared to their highest level since 1992 thanks to the bonus, increasing by 40 percent on the year to 401,000. At the same time, exports fell by a quarter.

The government made clear over the past two weeks that the program would be expanded, but left details open. By the end of last week, the number of applications had soared to some 1.2 million.

Ministers rejected suggestions from some politicians that the level of the car-scrapping bonus be cut from 2,500 euros after the end of May.

However, officials insisted yesterday that the funding will not be expanded once the 5 billion euros are exhausted, and that the program will finish by the end of this year.

"After that, it's over," said Economy Minister Karl-Theodor zu Guttenberg. He warned "those who want to see an endless shower of money" against expecting more.

He urged potential applicants to "examine very sensibly whether it is actually necessary."

Critics have charged that the program - introduced as the government prepares for elections in September - benefits auto makers at the expense of sales in other industries and may just delay a slump in car sales.


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