UPDATE 1-Germany agrees big boost in car subsidy scheme

* Funds for car scrapping subsidy more than tripled
* Incentives to run until end of year at latest
* Scheme boosted German car sales 40 percent in March

(Adds quotes, background)
By Matthias Sobolewski
BERLIN, April 7 (Reuters) - German Chancellor Angela
Merkel's coalition has agreed to boost subsidies for consumers
who trade in their old cars for new ones to 5 billion euros
($6.77 billion) from 1.5 billion, a government spokesman said.
Spokesman Ulrich Wilhelm told Reuters on Tuesday after a
meeting of coalition leaders in the Chancellery, that the
subsidy plan, which has contributed to a significant rise in new
car sales, would run until the end of the year at the latest.
Merkel's cabinet will meet on Wednesday to formally approve
the extension.
"The subsidy has proven to be an especially successful
instrument," Wilhelm said. "For this reason the coalition has
agreed to an extension and an increase in funds."
Under the plan, part of government stimulus measures aimed
at shoring up the economy, owners who trade in cars that are 9
years old or more for new fuel-efficient models receive a
government bonus of 2,500 euros.
About a million German car owners have applied for the
incentive, which before the extension could have been awarded to
a maximum of 600,000 consumers.
By more than tripling government funds devoted to the "cash
for clunkers" scheme, up to two million consumers can now
benefit from the bonus, which contributed to a 40-percent jump
in German car sales in March.
Some members of Merkel's conservatives had opposed an
extension on cost grounds and warned that boosting it now would
only prolong the hangover for an economy that is widely expected
to post its worst contraction this year since World War Two.
Critics have also pointed to negative side-effects of the
subsidy, including an inadvertent blow to retailers, car repair
shops and used-car dealers. The scheme has sent scrap metal
prices into freefall.
Small carmakers have benefitted most from the incentive
plan, while luxury brands, such as Germany's Daimler
and BMW , have failed to get a big boost.
(Reporting by Matthias Sobolewski; Writing by Noah Barkin)
((noah.barkin@reuters.com; +49 30 2888 5091; Reuters
Messaging: rm://noah.barkin.reuters.com@reuters.net))
($1=.7389 Euro)
Keywords: GERMANY CARS/SUBSIDIES

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