German chems welcome ECB rate cut, but press for tax relief

16 January 2009 16:58  [Source: ICIS news]

TORONTO (ICIS news)--Germany's chemical industry association VCI on Friday welcomed the European Central Bank’s (ECB) interest rate cut to 2%, but pressed for the suspension of new tax rules that restrict the amounts of interest expenses companies can deduct for tax purposes.

The restrictions, which were introduced last year, prevented chemical producers and others from taking full advantage of the rate cut, said Utz Tillmann, general manager of Frankfurt-based Verband der Chemischen Industrie (VCI). 

The new rules were an extra burden on producers amid the current difficult economic environment and as such largely offset the postive impulse from the ECB's interest rate reduction, he added.

The ECB on Thursday cut rates by a half percentage point to 2% as economic data showed signs of a deepening recession in the 16-member euro area.

VCI, for its part, expects Germany’s chemical production to fall 1% in 2009, it said last month.

However, some commentators said that forecast may be too optimistic as economic indicators show that Europe’s largest economy could shrink by over 2.0% in a tough 2009.

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By: Stefan Baumgarten
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