Law Library Stacks

Back to Index of Legal Reports

On February 11, 2009, the United States Senate and the House of Representatives reached a final deal on a $789 billion economic stimulus bill (HR 1, The American Recovery and Reinvestment Act of 2009). Both legislative bodies passed the bill on February 13, and the President signed it into law on February 17. The final bill includes $507 billion in spending programs, with more than $150 billion to spend on public works projects for transportation, energy, and technology, and $282 billion in tax relief.

Since the onslaught of the global financial and economic crisis last year, many countries have unveiled various stimulus packages to bolster their weakening economies and fight the effects of a global slowdown. Thus, in November 2008, China and Germany proposed economic stimulus plans of US$586 billion and $40 billion, respectively; Canada proposed a plan worth about US$24 billion in January 2009; France unveiled a $34 billion plan in February 2009; and Singapore, a $15 billion plan, in January 2009.

Although the primary focus of these various stimulus packages in different nations is to keep their own economies on track, it is difficult to insulate any economy from a global downturn. The nations are ever more dependent on each other in regard to export and investment growth, securities and property markets, and even consumer confidence, among many other areas. The financial and economic woes of one country can instantly be the added burden of another; just as a stimulus package and recovery plan of one country can also eventually lead to relief and growth in another.

In this context of connectivity among nations, the Law Library of Congress presents a series of reports summarizing the recent developments in the proposal or implementation of financial and economic stimulus packages in selected foreign countries. They cover the following jurisdictions: Argentina, Australia, Brazil, Canada, China, the European Union, France, Germany, Hong Kong, Mexico, New Zealand, the Russian Federation, Singapore, South Africa, Sweden, Taiwan, and the United Kingdom. These reports, whether long or short, serve one purpose: to help bring a comparative and global perspective to our understanding of the formulation, implementation, and ultimate impact of the current $789 billion U.S economic stimulus bill.

Argentina – Congress Passes Law on Anti-Crisis Measures

On December 18, 2008, both houses of Argentina’s Congress passed Law 26476 on Anti-Crisis Measures (Régimen de regularización impositiva, promoción y protección del empleo registrado, exteriorización y repatriación de capitals, INFOLEG online database, Ministry of the Economy and Public Finance, anexos/145000-149999/148719/norma.htm (external link) (last visited Feb. 12, 2009)). The economic stimulus law is aimed at promoting employment, production, and consumer confidence to counter a record five-year low in economic growth, which is partly a consequence of the global economic crisis. (Sancionaron el Blanqueo y la Moratoria, Diario La Nacion, Dec. 19, 2008, available at &high=medidas%20anticrisis (external link).)

“The law provides for incentives for small and medium-size companies to hire and put on the books workers who currently are paid under the table. Those firms that do so will be given pardons for back taxes and only be required to pay 50% of related labour taxes the first year and 75% the second year (Funding Argentina’s New Deal, The Economist, Dec. 4, 2008, available at id=12725187 (external link)). It also allows individuals and companies to repatriate capital to be invested in Argentina under a preferential tax rate of 1 to 8 percent, a significantly lower rate than the current 10-35%. (Id.)

Businesses and workers supported and reacted positively to the tax-cut opportunity and the public-works plan to create jobs. However, opponents fear the tax moratorium “would be unfair to law-abiding taxpayers and sends the message that it pays to cheat” (Id). Concern has also been voiced about the money laundering opportunity opened up by the law, because, even though Argentina’s anti-money laundering law remains in effect, the new statute does not require the source of repatriated funds to be reported. (DIARIO LA NACION, supra.)

Moreover, as the press has pointed out, Argentina is already under scrutiny by the The Financial Action Task Force. This inter-governmental body aimed at developing and promoting national and international policies against money laundering and terrorist financing has reportedly already been looking at Argentina. (THE ECONOMIST, supra.)

(Graciela Rodriguez-Ferrand)

Australia – Second Stimulus Plan Announced

Australia’s government proposed a large-scale stimulus plan designed to retain jobs and protect the country from the effects of the international economic crisis, and it was approved by the Australian Senate. (Rachel Pannett, Australia’s Senate Approves Stimulus Package, Wall Street Journal, Feb. 13, 2009, available at http://online. html (external link).) The A$42 billion (about US$27 billion) in the proposal would go in large part to education, housing, energy efficiency in homes, community infrastructure, and support to small businesses, and be paid out from 2009 through 2011. The education component would include construction of school halls, libraries, indoor sports facilities, and performing arts centers. Primary schools would receive between A$250,000 and A$3 million for capital expenditure projects, while A$1 billion would be allocated for science and language labs.

Community infrastructure projects may include making highway improvements; constructing railway gates; and building local libraries, community centers, and sports arenas. There would also be a A$6 billion increase in spending on public housing, aimed at the creation of about 20,000 new homes by December 2010. (Kate Hannon, Govt Releases $42B Stimulus Package, Financial Times Bulletin Wire, Feb. 3, 2009, LEXIS/NEXIS, ASIAPC Library, CURNWS File.)

In addition, the plan includes A$12.7 billion for bonuses to low- and middle-income households and individuals; these would amount to A$950 each and were to be paid in installments in the next few weeks. Workers earning less than A$100,000 would be eligible; the payments would also go to single-income families that currently receive certain tax benefits for created for families, as well as to farmers, students, and unemployed workers intending to receive education or retraining.

The current plan would be the second recent stimulus for the Australian economy; a $10.4 billion economic security strategy was adopted in October 2008. In addition to the stimulus spending, the government has guaranteed bank deposits, aided the automobile industry, and shored up investments in residential mortgages.

Under the proposal, tax breaks are also planned for small businesses to insure that jobs are not lost. For example, if a company buys equipment like computers or backhoes in the next few months, it would be eligible for an additional tax deduction.

Speaking about the plan, Prime Minister Kevin Rudd said that without the stimulus, “the economy would run a grave risk of generating negative growth … .” He went on to state that although the plans mean the government will have a deficit, “[t]his is not a question of choice. This is what we are required to do.” (Id.)

(Constance A. Johnson)

Back to Top

Brazil – Investment in Infrastructure to Fight the International Financial Crisis

On February 10, 2009, during a national meeting with mayors (Encontro Nacional com Novos Prefeitos e Prefeitas), Brazilian President Luiz Inácio Lula da Silva announced to the recently elected mayors of more than 5,000 municipalities that it is necessary to anticipate as much as possible the execution of infrastructure projects that have the participation of both the federal and municipal governments to fight the international crisis. According to Lula, the federal government will not cut any spending that has been designated for the Growth Acceleration Plan (Programa de Aceleração do Crescimento - PAC), a national program launched in January 2007 that is designed to unlock the country’s economy and boost its growth rate to five percent.

The Plan is expected to help Brazil fight the crisis as it creates jobs. (A Prefeitos, Lula Diz que Corta o Batom de Dilma, mas Não Cortará Obras do PAC e Critica Imprensa, O Globo Online, Feb. 11, 2009, available at 2009/02/10/a-prefeitos-lula-diz-que-corta-batom-de-dilma-mas-nao-cortara-obras-do-pac-critica-imprensa-754347339.asp (external link).)

(Eduardo Soares)

Brazil – Payment of Unemployment Insurance Extended

On February 11, 2009, Brazil’s Ministry of Labor extended the payment of unemployment insurance (seguro-desemprego) to sectors of the economy that are facing high levels of unemployment. In order to assess which sectors will be granted the extension, the Ministry will calculate the average number of layoffs that occurred in the months of December 2008 and January and February 2009. Initially, the payment was made for a period ranging from three to five months; the Ministry has now extended the payment of the benefit to five to seven months.

According to the Minister of Labor, Carlos Lupi, if Brazilian President Luiz Inácio Lula da Silva deems it necessary to further extend the payment period, the benefit can be paid for up to ten months through the issuance of a Provisional Measure to that effect. (Seguro-Desemprego Poderá Ser Pago por Até Sete Meses, AGÊNCIA BRASIL, Feb. 11, 2009, available at noticias/2009/02/11/materia.2009-02-11.3771998879/view. (external link))

(Eduardo Soares)

Back to Top

Canada – Budget Implementation Act Introduced

The Minister of Finance in Prime Minister Stephen Harper’s Conservative Government has introduced a proposed Budget Implementation Act, 2009, in the House of Commons, in order to implement many of the provisions of the budget unveiled on January 27, 2009. (Bill C-10, 40th Parl. 2d Sess., (external link) (last visited Feb. 12, 2009).) The bill contains 15 detailed sections and is an essential part of the government’s Economic Action Plan, which aims to provide approximately Can$30 billion (aboutUS$24.1 billion) in support of the Canadian economy this year, as well as to introduce needed regulatory reforms.

In a background paper, the Department of Finance has described how the Economic Action Plan aims to provide:

  • almost Can$12 (about US$9.6 billion) to build and repair infrastructure;
  • Can$20 billion (about $US16.08 billion) in personal income tax relief for this and each of the next five years;
  • Can$7.8 billion (about $US6.27 billion) to stimulate housing construction;
  • Can$200 billion (about US$160.8 billion) through an Extraordinary Financing Framework to improve access to bank financing; Can$8.3 billion (about US$6.6) for the Canada Skills and Transition Strategy and Enhancements to the Employment Insurance Programme and
  • Can$7.5 billion (about US$6.02 billion) in targeted support for the automotive, forestry, clean energy and certain other manufacturing sectors.

Through these measures, the government hopes to boost real GDP by 2.5 percent and create or maintain about 265,000 jobs by the end of 2010. (Press Release, Department of Finance Canada, Budget 2009: Canada’s Economic Action Plan (Jan. 27, 2009), available at (external link).)

In drafting the Economic Action Plan, the Conservative government was required to try to include enough measures designed to stimulate the economy to gain the support of at least a dozen members of one of the three opposition parties. It appears that the government is most hopeful of gaining the support of members of the Liberal Party, who have recently chosen a new leader in Michael Ignatieff.

Some critics claim that the government has abandoned its Conservative principles. The cover of the February 9, 2009 issue of Maclean’s, Canada’s largest news magazine, bears a picture of Prime Minister Harper and the caption, “The End of Canadian Conservatism.” This issue also contains an article by Andrew Coyne entitled How Harper Sold Out to Save Himself. (20 Maclean’s, (Feb. 9, 2009).)

While the Government contends that its proposed actions are required by the extraordinary economic situation and not a change in philosophy, the realization of how hard Canada is being by the current recession has surprised many Canadians. When the banking crisis first emerged in the United States, Canada and its banks seemed to be in a much stronger position to weather the storm. However, declines in exports and consumer spending have since created serious mortgage and other financial crises in Canada.

(Stephen Clarke)

Back to Top

China – Economic Stimulus Plan

On November 9, 2008, the State Council of China announced a plan to increase domestic demand and stimulate economic growth by investing an estimated RMB4 trillion (about US$585 billion) in ten areas by the end of 2010, as a response to the global financial crisis. According to the announcement, only RMB100 billion (about US$14.6 billion) was actually scheduled to come from the central government for the last quarter of 2008; another RMB20 billion (about $2.9 billion) will come from the central government to rebuild communities destroyed by the Sichuan earthquake in May. It is not clear how much the central government will spend in the rest of the time before 2010. The total RMB4 trillion will not come only from the central government, but rather will in part come from local governments and societal investment, according to the State Council announcement.

The ten areas that will receive investment are: (1) low-income housing; (2) rural infrastructure; (3) major infrastructure, including railways, highways, and airports; (4) health, culture, and education; (5) ecological environment; (6) science and technology innovation and industrial structure adjustment; (7) post-earthquake rebuilding; (8) income increases for urban and rural residents; (9) value-added tax reform and other methods to reduce the burden on enterprises by RMB120 billion (about $17.6 billion); and (10) improvement of financial systems in support of economic growth. (Premier Wen Jiabao Presides over State Council Executive Meeting, Decides on Ten Measures to Increase Domestic Demand [in Chinese], XINHUANET, Nov. 19, 2008, available at (external link) (in Chinese)).

More recently, on February 3, 2009, the central government was reported to have launched a second round, arranging another RMB130 billion (about $19 billion) of investment, with only RMB35 billion (about $5.1 billion) to go to “central projects;” another RMB95 billion (about $13.9 billion) will go to “local projects,” according to the National Development and Reform Commission, China’s key economic planner (NDRC). Thus, it is expected only a very small amount of the money will really come from the central government. (China Central Government Cashes in Another $19 Billion for Stimulus Plan, XINHUANET, Feb. 3, 2009, available at english/2009-02/03/content_10757523.htm (external link).)

More details of the second-round plan were published by a commercial news agency, the 21ST CENTURY BUSINESS HERALD: RMB28 billion to low-income housing; RMB31.5 billion (to rural infrastructure; RMB27.5 billion (to major infrastructure (e.g., railways); RMB17 billion to health and education; RMB11 billion to environmental protection; and RMB15 billion (to industrial structure adjustment. (With Mostly Local Investments, the NDRC Launched RMB130 Billion Newly-Added Investment [in Chinese], (external link) (last visited Feb. 12, 2009).)

This plan, however, is not comparable to the U.S. economic stimulus plans. It was not submitted to the National People’s Congress (NPC) for its approval and is not expected to be revealed even in the March annual meeting of the NPC. The government refuses to make the details public, including information on allocation of the investment between the central government, local governments, and other sources; the specific projects to receive the investments; and the results expected from the plan’s implementation. It was reported in the press in December 2008, citing to the NDRC, that the first RMB100 billion of the central government’s funds were already allocated. (NDRC: 100 Billion Investment Has Been Allocated; Cut-Off and Waste Will Be Strictly Prevented [in Chinese],NEWS.IFENG.COM, 271.shtml (external link) (last visited Feb. 12, 2009).

(Laney Zhang)

Back to Top

European Union – Recovery Plan

Since October 2008, the financial and economic situation in the EU has declined rapidly, and the European Central Bank and other central banks have proceeded to reduce their interest rates. Meanwhile, EU Members have been actively engaged in tackling their domestic situations, based on their own circumstances.

The European Commission, on October 1, 2008, put forward a proposal in an effort to strengthen the stability of the financial system across the Union. The proposal, which was drafted after extensive consultation among the European Commission, international partners, industry, and the Member States, amends the existing EU rules on capital requirements for banks. The rules include two Capital Requirements Directives, 2006/48/EC and 2006/49/EC, whose main objective is to ensure that banks and investment firms are functioning efficiently and are financially sound. Highlights of the proposal include the following measures:

  • establishing restrictions on the amount of bank lending to any one party; As a consequence, banks will not be able to lend money to other banks beyond a certain amount.
  • improving supervision of cross-border banking groups through the establishment of clearer and more transparent rules on rights and obligations of the appropriate national supervisory authorities;
  • improving the quality of banks' capital, through the establishment of criteria to evaluate whether ‘hybrid’ capital, which includes both equity and debt, qualifies to be included as part of a bank's total capital;
  • improving liquidity risk management for banking groups that engage in business in several countries across the EU; and
  • improving risk management for securitized products, thereby tightening the rules on securities debts.

The proposal is being forwarded to the European Parliament and the Council of the European Union for further review. (Press Release, IP/08/14333, Europa, Commission Proposes Revision of Bank Capital Requirements Rules to Reinforce Financial Stability (Oct. 1, 2008), available at reference=IP/08/1433&format;=HTML&aged=0&language=EN&guiLanguage=en (external link).)

On February 5, 2009, the European Commission, based on the rules of the EC Treaty on state aid, authorized certain measures adopted by the United Kingdom designed to assist ailing companies. The Commission opined that the proposed UK measures met the conditions established by the Commission’s Temporary Framework, which provides EU Members with additional options to improve access to financing by businesses. The UK is the fourth country, after Germany, France, and Portugal to take advantage of the Temporary Framework. (Press Release, IP/09/215, State Aid: Commission Authorises UK Crisis Scheme for Aid of up to €500 000 per Business (Feb. 5, 2009), available at aged=0&language=EN&guiLanguage=en (external link).)

For its part, on November 26, 2008, the European Commission adopted a European Economic Plan (EERP). (Communication from the Commission to the European Council: A European Economic Recovery Plan, COM(2008) 800 final, Nov. 26, 2008, available at FIN:EN:PDF (external link).) The EERP is a comprehensive framework that contains recommended actions to be taken at the European Union level and measures to be adopted individually by the EU Members. The EERP will be evaluated in the spring of 2009. It has two critical components:

  • The major injection of purchasing power into the economy, in order to boost demand and promote confidence. That purchasing power represents the equivalent of approximately 1.5% of the European Union gross domestic product, that is, about €200 billion (about US$255.5 billion).
  • A program to direct action to “smart” investment, including in energy efficiency to create jobs and save energy; in clean technologies, like construction and automobiles; and in infrastructure to promote efficiency and innovation.
  • (Id.)

The EERP was subsequently endorsed by the European Council on December 12, 2008. In particular, the Council supported the following actions by the EU:

  • An increase in intervention by the European Investment Bank of €30 billion in 2009-2010, especially for small- and medium-sized businesses for renewable energy and for clean transport;
  • Immediate steps, supported by the European Social Fund, to assist employment, especially for the benefit of the most vulnerable segments of the population;
  • Measures to promote employment in the key sectors of the European economy; and
  • Simplification of procedures and expedited implementation of programs financed by the various EU funds, such as the Cohesion Fund, Structural Funds, and the European Agricultural Fund for Rural Development.

Recently, two other key issues have surfaced on the EU agenda: the handling of “toxic” or “impaired” assets and protectionist trends. Regarding the toxic assets, on February 10, 2009, the Eurozone finance ministers reached an agreement to coordinate handling such assets on European banks’ balance sheets, rather than allowing the governments of the EU Members to go ahead with their individual plans. Toxic assets include homeowners’ and business loans that remain unpaid and shareholdings in businesses undergoing bankruptcy.

The Ministers claimed that a coordinated approach was essential in order “to ensure a level playing field and avoid distortions among banks” and in order to restore public confidence. (EU Agree to Coordinate on Toxic Assets, FORBES, Feb. 10, 2009, available at (external link).) The main thrust of the coordinated approach is that the banks will retain part of the risk and will be required to initiate some management changes in an effort to improve ethics and be more transparent.

The question of valuation of toxic assets turned out to be a complex and thorny issue during the meeting, especially since many are considered as having no value at current market prices. The European Commission stated that it intends to draft guidelines in the near future pertaining to the nature of assets to be covered and their evaluation. (FORBES, id.)

The “buy American” idea, initially inserted in the U.S. stimulus bill and criticized by the European Union as a protectionist measure, was transplanted across Europe, as EU Members try to contain job losses. The European Commission and the Czech EU Presidency have expressed their concern as EU Members discuss options to follow their own protectionist measures. (Brussels Seeks to Regain Lead on Economic Crisis, EU OBSERVER, Feb. 11, 2009, available at (external link).)

(Theresa Papademetriou)

Back to Top

France – Bank Support Plan

The French Parliament passed Amended Law 2008-1061 of October 16, 2008, on Finances to Fund the Economy, aimed at restoring trust in the French banking and financial system and guaranteeing the good functioning of the economy. The measures adopted reflect the action plan devised by the Member States of the euro zone a few days earlier.

The Law sets forth two types of measures: 1) measures to enhance the refinancing of credits institutions, and 2) measures aimed at helping the recapitalization of financial institutions where necessary. The total amount of these measures is limited to a maximum of €360 billion (about US$458 billion), 320 billion for refinancing and 40 billion for recapitalization.

The Law provides that “the state guarantee may be granted for a consideration to debt instruments issued by a refinancing company whose seat is in France and whose objective is to grant loans to eligible credit institutions.” (Loi 2008-1061 du 16 octobre 2008 de finances rectificative pour le financement de l’économie, Journal Officiel, Oct. 17, 2008, at 15905.) These credit institutions will enter into agreements with the government setting forth the credit institutions’ financial and ethical obligations in return for the financial help received. The refinancing company is supervised by the French Banking Commission. The loans granted to the eligible credit institutions must be backed by collateral. The Ministry of Economy may also exceptionally decide, notably in case of emergency, to directly guarantee against consideration debt instruments issued by credit institutions.

The Law further provides that “in order to guarantee the stability of the financial French system, the state guaranty may be granted to the financing raised by a [new created] wholly state-owned company, having for object to subscribe for securities issued by financial institutions and representing regulatory capital.” (Id.) A decision of the Ministry of the Economy specifies the guarantee terms and the ceiling for each guaranteed transaction.

A committee to oversee the support plan met recently to review the progress made. It established that the refinancing company granted €23 billion in loans to 13 credit institutions. The loans were granted at a 4% interest rate. At the end of the month, the state will have received €380 million as payment for its guarantee. In addition, through its wholly state-owned company, the state has provided €10.5 billionto six financial institutions. The state received an 8.2% remuneration under this plan and is expected to receive a total of €850 millionby the end of 2009.

Finally, the committee noted that the Credit Mediator helped 1,200 companies to resolve problems with banks arising out of the credit crunch. The Credit Mediator was appointed in October 2008 to check on whether banks are putting unacceptable restrictions on credit, in which case they will see their bail-out funds severed. (Le comité de suivi du plan de financement de l’économie française est installé depuis ce mardi 27 janvier 2009, Secteur Public, Jan. 29, 2009, available at (external link).)

In addition to the work done by the committee, the government is required to prepare a report for Parliament each quarter on the implementation of the Law. (Journal Officiel, supra.)

(Nicole Atwill)

Back to Top

France – Economic Stimulus Package

On February 2, 2009, French Prime Minister Francois Fillon unveiled a series of measures totaling €26.5 billion (about US$34 billion) to support the economy. The package strongly prioritizes investment. It is divided into three sections: €11.4 billion will go towards improving businesses’ cash flow and allowing them to invest; €11.1 billion will be provided for direct state investment; and the remaining €4 billion will be provided by large state-run companies to improve rail and energy infrastructures and the postal service. Public investment will also fund transport infrastructure, higher education, research and improvement of state-owned properties.

Seventy-five percent of the €26 billion must be used in 2009; €10 billion will immediately be used to fund 1,000 projects located across France. These projects have been selected because of their capacity to be launched with no delay and to stimulate employment.

The package also contains special measures for housing, such as building 100,000 public housing units over a two-year period and doubling until the end of 2009 the number of zero- interest-rate mortgages offered to first-time buyers for the purchase of new housing. It also includes a salary supplement of €200 to help low income families who meet the criteria.

A committee chaired by the Prime Minister will oversee the implementation of the package. The government expects that the stimulus package will produce economic growth of about 1.3 percent. (Stimulus Package: 1,000 Projects Across France, Government Portal, Prime Minister, Feb. 10, 2009, available at latest_news_97/stimulus_package_1_000_62594.html (external link).)

(Nicole Atwill)

Back to Top

Germany – Stimulus Packages

To assist domestic financial institutions in the current global economic crisis, Germany promulgated the Act Creating a Financial Market Stabilization Fund that became effective on October 18, 2008 (Gesetz zur Errichtung eines Finanzmarktstabilisierungsfonds (BUNDESGESETZBLATT (BGBl) I at 1982, available at
__Verordnungen/Finanzmarktstabi.html (external link)
). The new Act guarantees €400 billion (about US$514.4 billion) worth of interbank loans with maturities of up to three years and allocates €20 billion (about US$ 25.7 billion) to back up this guarantee. An additional €80 billion has been set aside to shore up equity in troubled banks.

Both measures have sunset dates of December 31, 2009. In addition, the German Federal Cabinet has also guaranteed the private bank deposits of individuals, should the existing deposit insurance schemes not provide sufficient coverage. (Ihre Fragen zur Garantieerklärung der Bundesregierung, Oct. 5, 2008, available at und__Buerger/Alter__und__Vorsorge/038__Spareinlagen.html (external link).)

To stimulate the economy, the Federal Cabinet introduced an initial package worth €31 billion (about US$40 billion) on November 5, 2008, that has since been implemented through various administrative and legislative measures (Bundesministerium für Wirtschaft, Beschäftigungssicherung, schaft/Konjunkturpakete/ konjunkturpaket-1.html (external link) (last visited Feb. 12, 2009).). The package focuses on tax incentives and subsidies to industry. On January 17, 2009, a second stimulus package worth €50 billion was introduced in Parliament that is expected to pass in February 2009. The package promotes employment; strengthens the economy, particularly the automobile industry; and provides further tax cuts. (DEUTSCHER BUNDESTAG DRUCKSACHE 16/11740.)

(Edith Palmer)

Back to Top

Hong Kong – Economic Stimulus Package Targets SMEs, Job Creation

In response to the global economic crisis, the Government of the Hong Kong Special Administrative Region formed the ten-member Task Force on Economic Challenges on November 3, 2008. Chief Executive Donald Tsang announced on December 8, after the body’s second meeting, that “the government would provide up to US$12.82 billion in loan guarantees for enterprises and spur employment opportunities next year as part of its efforts to lead Hong Kong out of the global economic downturn.”

The government’s priorities, Tsang stated, were to “support small and medium enterprises (SMEs) to prevent job loss and to provide more than 60,000 employment opportunities next year.” Stimulus Plan to Support SMEs and Prevent Job Losses, Hong Kong Circle (Dec. 2008), available at (external link).)

Measures to assist enterprises to secure loans include:

  • Substantially expanding the recently introduced Special Loan Guarantee Scheme (SLGS), by increasing the maximum government commitment to US$12.82 billion while continuing the government’s guarantee of 70 percent of bank loans received by companies;
  • Raising the loan ceiling for each company from US$128,205 to US$769,230, with US$384,615 in revolving credit;
  • Allowing the loan to be used not only as operating funds, but for other purposes, such as commercial overdrafts and letters of credit;
  • Allowing all firms except listed companies to apply to the SLGS, to enable more of them to benefit. (Id.)

As for the plan to create new jobs, Tsang announced that over 60,000 would be provided by “expediting infrastructure projects, advancing recruitment of civil servants and creating temporary positions.” (Id.) While making “the best use of funds” approved for job creation, Tsang added, the government would also promote innovation and technology environmental awareness and citizens’ enhancement of their competence and skills; complement the efforts of non-governmental organizations in expansion or removal projects; and have Hong Kong’s Policy Secretaries facilitate job creation by personally overseeing licensing and approval procedures to expedite the process and better meet market needs. (Id.)

Hong Kong’s efforts to weather the downturn may also be helped by certain measures to be introduced by the Central Government of the People’s Republic of China, for example, the gradual expansion of the scope of renminbi (RMB) business by allowing eligible firms in Hong Kong to perform RMB trade payment; the signing of a currency pact between the People's Bank of China (PBC) and the Hong Kong Monetary Authority, with provision of capital support to Hong Kong by the PBC, if necessary; encouragement of mainland organizations to launch global financial businesses with Hong Kong as a platform; and increasing of the number of mainland residents visiting Hong Kong under the individual visit scheme. (Id.)

Hong Kong banks are also involved in the effort to stimulate the economy. Earlier in December, HSBC launched “a US$5 billion global loan fund for SMEs, US$516 million of which has been earmarked for Hong Kong firms,” and the Bank of East Asia subsequently announced a US$129 million SME loan fund. (Financial Stimulus Shores Up SMES , HKTDC, Dec. 16, 2008, available at http://marketinfo.hktdc. com/content.aspx?data=hk_content_en&contentid=1063171&SRC=HK_BuNeTr&w_sid=194&w_pid=638&w_nid=9976&w_cid=1063171&w_idt=1900-01-01&w_oid=360&w_jid= (external link).) It was also reported that in February 2009 the Hong Kong Trade Development Council (HKTDC) would launch an assistance package worth about US$15.5 million that will include an incentive program aimed at attracting new buyers to its international trade fairs in Hong Kong and subsidies for local HKTDC exhibitors. (Id.)

(Wendy Zeldin)

Back to Top

Mexico – National Agreement in Support of Family Finances Announced

In January 2009, Mexico’s President Felipe Calderón announced a National Agreement in Support of Family Finances, which is aimed at overcoming the effects of the international economic crisis. The Agreement was signed by the President, governors, the federal legislative branch, and labor and corporate organizations. It has five goals:

  1. to provide support for workers and jobs;
  2. to provide financial support to families;
  3. to promote competitiveness and support small and medium businesses;
  4. to invest in infrastructure to stimulate competitiveness and job development; and,
  5. to promote transparency and efficiency in public spending.

(Con este Acuerdo se da un paso importante para proteger el empleo y procurar la estabilidad económica: Presidente Calderón, website of the President of Mexico, Jan. 7, 2009, available at (external link).)

(Gustavo Guerra)

Back to Top

The Netherlands - New Stimulus Package

Prime Minister Jan Peter Balkenende of the Netherlands outlined his government’s plan to “invest heavily in the Netherlands’ future” in a statement made to the Dutch House of Representatives on March 25, 2009. (Press Release, Government of the Netherlands, Balkenende Presents Measures to Tackle Crisis (Mar. 26, 2009), available at (external link)). The government has proposed a new stimulus package of €6 billion (about US$7.9 billion) (equivalent to about 1% of gross domestic product) for 2009 and 2010, to be spent over six years, and drawn up measures to restore public finances and implement needed reforms. Dutch provinces and municipalities are to have an additional €1.5 billion to invest. The spending plan, the government contends, will boost consumption and the economy by €50 billion in the short term. In November 2008, the government had launched an €6 billion stimulus plan for companies and pumped €13.75 billion into the financial system, in addition to purchasing the Dutch operations of Fortis Bank for €16.8 billion. (Id.; Dutch PM Unveils Six-Bln-Euro Stimulus Plan, EUBUSINESS, Mar. 25, 2009, available at (external link)).

Four key aspects of the plan are as follows.

  • In the area of work and economic activity, the plan seeks to “ensure that as many people as possible keep their jobs,” Balkenende stated, with part-time unemployment benefits to help achieve this aim. Retraining programs will be made available to assist those whose job loss is unavoidable to find new employment quickly. Top priority will be given by the government to preventing youth unemployment.
  • To achieve a “clean and innovative economy,” the stimulus plan includes investment in sustainability, energy security, renewable energy, and innovation. Among the proposals are schemes for scrapping old cars and for insulating homes.
  • In the area of infrastructure and construction, the government will present spending plans for road and waterway maintenance and for improvement of school and hospital buildings or the construction of new ones. The Prime Minister stated that the government will also accelerate procedures to enable businesses and private individuals to undertake construction projects more quickly.
  • The stimulus package also seeks to promote company liquidity. By abolishing the flight tax, for example, the government will seek to raise the liquidity of companies connected with Schiphol Airport. (Press Release, supra.)

Balkenende conceded that “all the measures for restoring the economy in the short term are very costly.” (Id.) The stimulus package is in addition to the €80 billion already spent to restore confidence in the country's banking sector since September 2008; even though leaving the 2009 and 2010 spending plans in place will cost the additional €50 billion, he stated, “[t]hese decisions are necessary and defensible given the economic situation.” (Press Release, supra; ROUNDUP: Dutch Announce Six-Billion-Euro Economic Stimulus Plan, SILVERSCORPIO, Mar. 25, 2009, available at (external link).) To restore public finances, starting in 2011 the government plans to reduce the deficit by at least 0.5% of GDP a year, a commitment to be stipulated in an act of Parliament.

Finally, Balkenende addressed the need for reforms in the fields of health care, education, and pensions for the next four decades. The state pension age will be raised to 67 from 65, an effort will be made to control healthcare costs, and those who own a home worth €1 million (about US$1.3 million) or more will have to pay more tax on it. “The reforms are necessary and fair,” Balkenende stated, “[b]ut we realise that they will have far-reaching effects. That is why they will be introduced gradually, beginning in 2011.” (Press Release, supra; SILVERSCORPIO, supra.)

It has been pointed out in the press that there are no “substantial” reforms in the stimulus plan to regulate the financial sector, nor does the plan include any measures to improve supervisory functions of the central bank (De Nederlandsche Bank) or the Authority for the Financial Markets (Autoriteit Financiële Markten, the country’s financial watchdog). The two institutions reportedly “have come under strong criticism in recent months from experts and the public alike for allegedly failing to prevent the problems in the financial sector.” (SILVERSCORPIO, supra.)

(Wendy Zeldin)

New Zealand – Requirements to Build Eased as Part of Stimulus Plan

On February 2, 2009, New Zealand’s Prime Minister, John Key, announced a proposal to revise the country’s Resource Management Act (RMA). The changes are aimed at easing the way for development projects and home remodeling plans, which would help stimulate the economy. Other elements of the economic plan include increased public spending on roads, housing, the electricity infrastructure, schools, and hospitals, plus business tax changes that will benefit small- and medium-sized companies. (Vernon Small & Tracy Watkins, Government Bulldozes Barriers to Growth, DOMINION POST, Feb. 4, 2009, available at (external link).)

The major changes proposed for the RMA include:

  • local councils would have to reduce their fees if they improperly delay processing an application for a project that would impact the natural environment;
  • those applying for “resource consent” could, with council approval, skip a step and go directly to the Environment Court;
  • current rules that require local council consent to trim or cut down trees of a certain size would be eliminated;
  • the planning process at the district and regional levels would be streamlined and only cases with legal issues would be appealed to the Environment Court; and
  • fines for violating environmental laws would be increased from NZ$200,000 to NZ$300,000 (about US$101,300 to 152,000) for individuals and to NZ$600,000 (about US$304,000) for companies. (Eloise Gibson, Government Cuts Red Tape to Help Homeowners, NZHerald.Co.NZ, Feb. 4, 2009, available at (external link).)

Developers and business groups in general reacted favorably to the proposals, which are expected to make the approval process quicker and less costly for the approximately 50,000 environmental permits sought in the country annually. However, environmental groups expressed concern. Tree Council representative Hueline Massey complained that the suggested changes to the laws on trees had been “out of the blue” and that the existing rules had been created to end the “destruction of good trees without a good reason.” (Id.)

(Constance A. Johnson)

Back to Top

Russian Federation – Economic Stabilization Measures

After the international financial crisis affected Russian financial institutions in September 2008, the government attempted first to regulate the financial sector, and then took special measures to expand public benefits. Recently, business- related laws were amended with provisions aimed at stimulating the economy. These measures focused not on rescuing individual enterprises or financing specific projects, but on providing for tax cuts, looser regulation, and simplification of the business climate in the country.

The first government acts were passed in order to prevent the bankruptcy of Russian banks. In October and November 2008, the Federal Law on the Central Bank was amended, with norms allowing the Central Bank of Russia to issue unsecured loans for six-month periods to Russian credit institutions insuring all private individual deposits by the Federal Government, no matter whether a bank is a member of the Russian equivalent of the U.S. Federal Deposit Insurance Corporation or not. The insured amount of the deposits has been increased more than twice. In order to preserve the banks, the Central Bank was authorized to purchase stocks and shares of credit institutions, and lower thresholds for the mandatory reserves and charter capital of commercial banks were approved.

Since December 1, 2008, oil export duties have been reduced. For the time being, duties will be determined each month based on oil price monitoring. In January and February 2009, export duties were decreased further. The oil price of US$38 per barrel was taken as the standard for defining their amount. Amendments to the Tax Code of November 26, 2008, cut the federal corporate profit tax rate from 24 to 20 percent and allowed provincial authorities to set local tax rates of 5 to 15 percent depending on the economic situation in the region. Since January 1, 2009, all excise tax collected by state authorities goes toward regional budgets. Previously, regions kept only two-thirds of this tax. Deductions for homeowners were also increased twice.

In December 2008, the government finalized a list of companies that will receive state support. Most of these companies are in the military industry sector. Their debt will be restructured, they will be better incorporated into the state procurement system, their production will be exempt from customs tariffs, and loans given to these companies will have subsidized interest rates. Agricultural producers will be able to deduct up to 95 percent of interest paid on their land until 2013. In 2009, US$5 billion will be given to struggling enterprises, in order to save jobs. Government representatives will be appointed to monitor the management of these companies. Similarly, Russia’s Central Bank is now authorized to appoint representatives to credit institutions that receive federal support.

Newly increased tariffs were introduced on the import of used transport vehicles, including cars. The definition of used cars was also expanded. This protectionist measure was supposed to stimulate production by national car manufacturers; however, it turned out to be an extremely unpopular measure because of the large share of the Russian market held by foreign car imports, and it provoked public unrest in some regions. (Putin Signed a Decree on New Tariffs, Newsru.Com, Dec. 10, 2008, available at (external link).)

Also, according to an emergency law, the Federal Government will be able to redistribute budget allocations during the next three years without parliamentary involvement and can give subsidies and tax privileges directly to regional and local budgets. An amount equal to US$2 billion was allocated to the regions in January 2009as an additional stabilization measure. Following the changes in the law, state corporations and international organizations are now allowed to issue stocks, but dividends may be paid only once in three years.

In order to lessen the burden of the crisis on individuals, the banks are prohibited from changing interest rates unilaterally on already existing loans. Since January 1, 2009, unemployment benefits have been increased, more people are eligible to apply for them, and the period during which this benefit is paid has been increased from six months to one year. Other social payments, such as retirement pensions and student stipends have also been increased. (The above overview is based on relevant legislation compiled in the Russian legal database Garant, (external link) (last visited Feb. 12, 2009)

(Peter Roudik)

Back to Top

Singapore – Budget Includes Stimulus Provisions

The Singapore budget for 2009, announced on January 22, 2009, is called the Resilience Package and includes S$20.5 billion (about US$15 billion) in stimulus spending. Singapore’s economy relies on export sales and financial markets, and thus it was greatly affected by the world economic situation. The focus in the budget package is on maintaining employment. National reserves of S$4.8 billion will be used to fund a Jobs Credit and Special Risk Sharing Initiative. (Nobby Solano, Singapore Budget 2009: Resilience Package Is a Massive Economic Stimulus Plan, ECONOMYWATCH.COM, Jan. 22, 2009, available at (external link).)

The main steps to be taken are:

  • Companies will be given a credit equal to 12 percent of employee salaries, up to the level of the median salary;
  • If a worker is receiving new job training, the government will pay 90 percent of the fees for that training, plus an hourly lost-productivity rebate to the company;
  • Low-income workers will receive 50 percent increases in wage supplements they are eligible for under the Workfare Income Supplement program;
  • Taxes on corporations will be decreased from 18 to 17 percent, with an effective rate of about 15 percent;
  • Individuals will receive a 20-percent personal tax rebate for the current year;
  • There will be a 40-percent property tax rebate; and
  • The government will spend S$4.4 billion on infrastructure, health, and education. (Id.)

(Constance A. Johnson)

Back to Top

South Africa – Stimulus

It was reported on Feb. 6, 2009, that in his State of the Nation address at the annual opening of the South African Parliament, the South African head of state, Kgalema Motlanthe, outlined a plan to stimulate the economy through “high public spending, creating new jobs in the social sector and helping private enterprises to counteract a slowdown in new investment.” His plan will focus on four areas, including the area of social programs, as set forth below:

  1. Public investment of up to R690 billion (about US$70 billion) in infrastructure and other projects;
  2. Increasing government hires in such areas as health, social work, education, and law enforcement;
  3. Mitigating the slowdown in private sector investment and the closing of production lines, in part by exploring the possibilities of giving workers longer holidays and extended training, cutting down work hours, and encouraging job sharing as alternatives to cutting jobs; and
  4. Expanding social programs, such as extending the child support grant to cover children up to 18 years old and making retirement available to individuals at a younger age.

(Govt Acts to Combat Global Crisis, ALLAFRICA.COM, Feb. 6, 2009, available at (external link).)

(Hanibal M. Goitom)

Back to Top

Sweden – Stimulus Plan and Recapitalization Plan

In late October 2008, Sweden’s Parliament passed a SEK1.5 trillion (about US$1.8 billion) financial package to help stabilize the country's financial sector in the face of the global lending crisis. It was reported in December, however, that “[s]o far, Swedish banks … appear to be faring relatively well and the package has yet to be implemented.” (Swedish Government Proposes EUR 2.2bn Stimulus Package, EU Business, Dec. 5, 2008, available at (external link)). The Swedish National Debt Office (NDO) is in charge of administering measures to counter the fiscal crisis and “has been given a broad mandate to provide support to institutions that encounter problems.” (Swedish National Debt Office, Financial Stabilisation, (external link) (last visited Feb. 12, 2009) The measures include:

  • the Guarantee Programme for medium-term debt, to ease borrowing by banks, under which banks and other institutions, subject to a charge, can conclude a contract for a government guarantee for their borrowing;
  • The Stabilisation Fund, aimed at financing any support actions to be taken by the government; Institutions will pay a charge to the Fund, payable upon improvement in the market situation, to safeguard taxpayers should the payment of support become necessary.
  • Bank support, to be provided to institutions in crisis if the government deems the institution to be “important to the financial system” and to be sustainable, with the form of support dependent on the situation.

(Id.; see also Press Release, Ministry of Finance, Government Takes Measures to Strengthen Financial Stability (Oct. 29, 2008), available at http://www.sweden. (external link).)

On December 5, the government proposed a three-year financial stimulus package of SEK22.9 billion (about US$2.7 billion). According to Prime Minister Fredrik Reinfeldt, in 2009 SEK8.3 billion would go towards job creation and support for the construction sector, in addition to the SEK32-billion worth of measures already budgeted. Another SEK8.8 billion would be applied to those sectors in 2010, followed by SEK5.8 billion in 2011. “The new measures included lowering taxes on all construction, renovations and maintenance carried out from [December 8].” (EUBusiness, supra.)

Although the opposition called for more extensive measures to reduce unemployment (5.7% of the workforce as of October 2008), Reinfeldt insisted on the need for a “responsible” economic policy, stating, “‘[t]he best message this government can send is to both use stimulus measures but also say to the Swedish people that we have ensured they won't lead to tax increases or to cuts in the Swedish welfare system’ in the long run.” (Id.)

In addition, on February 9, 2009, the government adopted a recapitalization plan of a maximum SEK50 billion to ease lending to households and businesses. Participating banks will be required under the plan to halt bonuses and pay raises to top management officials. Under the Ordinance establishing the plan, which enters into force on February 17, the NDO is authorized to provide capital injections upon obtaining government approval. The eligible institutions are the same as those entitled to participate in the Guarantee Progam, “i.e. banks, mortgage institutions and credit market companies serving municipalities, incorporated in Sweden,” and a given institution may receive an amount equal “to no more than the equivalent of an increase of two percentage points in the institution´s capitalisation.” (Press Release, Ministry of Finance, Government Introduces Recapitalisation Scheme to Safeguard Lending to Households and Businesses (Feb. 9, 2009), available at (external link).)

The capital injection can be in the form of share capital or hybrid instruments, to be provided through either: 1) government participation in a market transaction, with the state acquiring a maximum 70 percent of the shares or hybrid instruments, issued on the same market terms as those for other investors; or 2) government participation in a directed issue, with the state acquiring shares or hybrid instruments on state-determined terms. (Id.) Conditions of the capital injection “are designed to safeguard the interests of the taxpayer by guaranteeing the state continuous returns and a significant share of any value growth achieved by the institution during the time that the state contributes capital.” (Id.)

Restrictions on senior management remuneration, which are to be set forth in the agreement between the NDO and the institutions, will apply to the five individuals receiving the highest total remuneration, as follows:

  • fixed salaries may not go above the compensation level decided upon before October 20, 2008;
  • bonuses may not be approved during the agreement period;
  • previously earned bonuses may not be paid out during the agreement period; and
  • severance packages may not be more generous than those applied under current guidelines for senior managers’ terms of employment in state-owned enterprises. (Id.)

In addition, conditions aimed at preventing increases in board member fees or other related remuneration are to be imposed. (Id.) (For a comparison of the economic crisis and policy measures in various EU Member States, see, for example, Businesseurope ECOFIN Committee Meeting on 15 January 2009 – EU and MS face the Emerging Economic Recession and Implements Recovery Plans, BUSINESSEUROPE, Jan. 15, 2009, available at (external link); David Saha & Jakob von Weizsäcker, Estimating the Size of the European Stimulus Packages for 2009: An Update [as of Jan. 28, 2009], BREUGEL website, Jan. 30, 2009, available at target=/Files/media/PDF/Publications/Notes/UPDATED-SIZE-OF-STIMULUS-FINAL-2.pdf (external link) (PDF) [the U.S. and China are also included for purposes of comparison].)

(Wendy Zeldin)

Back to Top

Taiwan – Stimulus Plan and Related Measures

The Executive Yuan (Cabinet) of the Republic of China (on Taiwan) approved an economic stimulus package of roughly US$15 billion on November 24, 2008. Measures covered under the plan include shopping vouchers, infrastructure projects, and incentives to boost private investment and encourage upgrading of industries, with the whole package to be carried out over the next four years. (Financial Stimulus Package, GLOBAL LEGAL MONITOR, Dec. 12, 2008, available at //
.) In addition, Taiwan’s Banking Law was recently amended to tighten reporting requirements and control over bank capital, among other provisions.

The voucher program was instituted under the Special Statute for Distributing Consumption Vouchers for Revitalizing the Economy, which took effect on December 5, 2008, and remains in force until September 30, 2009. Under the program, consumers were issued coupons in late January for goods and services valid at all wholesale and retail stores, as well as at food and beverage establishments. According to President Ma Ying-jeou, Taiwan was the first country to distribute consumer vouchers since the onset of the worldwide economic downturn. (For more details, seeConsumer Vouchers Issued as Part of Financial Stimulus Package, GLOBAL LEGAL MONITOR, Feb. 4, 2009, available at //

Infrastructure projects, estimated at about US$12 billion, will include expansion of the subway system, railway line upgrades, bridge rehabilitation, sewage system improvements, and classroom construction and renovation. Roughly US$12 million of the funds would be allocated for urban renewal. As part of the plan to encourage investment, a package to promote the lease of industrial land will be extended into 2009. (Financial Stimulus Package, supra.)

Other incentives, such as subsidies to expand and launch small- and medium-sized enterprises, are to be broadened. Thus, Taiwan’s Statute for Upgrading Industries was amended on January 23, 2009. The law now specifies that a newly incorporated or capitally expanded company will be exempt from payment of business profit tax for the period of July 1, 2008, to December 31, 2009. The tax-exempt income or newly increased tax-exempt income tax concession amount will be limited by the capital investment and the proportion(?) of the investment made during that period. Such companies, however, will be limited to a one-time application for exemption from payment of the tax. (Amendment to Statute for Facilitating Upgrade of Industries, 6845 GAZETTE OF THE OFFICE OF THE PRESIDENT 56-57 (Jan. 23, 2009), available at

In addition, on February 9, 2009, in a move aimed at combating rising unemployment, the Ministry of Economic Affairs (MOEA) launched the New Store Major Subsidy Plan for persons seeking to establish their own franchise or chain store business. Under the subsidy program, a start-up fund of NT$50,000 (about US$1,472) will be granted to successful applicants. The program’s total budget is NT$25 million in the first phase, which will run until April 8, 2009. Phases 2 and 3, aimed at helping independent retail investors with a new subsidy program, will be rolled out in April. (Elizabeth Tchii, New Store Subsidy Plan Begins, TAIPEI TIMES, Feb. 10, 2009, at 12, available at (external link).)

The amendments to Taiwan’s Banking Law were promulgated on December 30, 2008. Among other changes, the threshold requirement has been lowered for the reporting of bank-share holdings to the (newly authorized) Financial Supervisory Commission (FSC) for approval; four levels of capital are now differentiated, based on the ratio of risk-free to risky assets, and the ratio of risk-free to risky assets cannot be less than a fixed ratio; the circumstances in which a bank may not use cash to distribute or buy back shares are stipulated, as are measures the FSC may take if a bank’s capital is inadequate, markedly inadequate, or seriously inadequate.

The FSC may at any time examine a bank’s recapitalization or financial business improvement plan undertaken in connection with these circumstances and, when necessary, consult with other agencies about the matter. The amendments also provide additional conditions under which information about a bank customer's deposits, loans, and remittances may be disclosed. (For more details, see Banking Law Amended, GLOBAL LEGAL MONITOR, Jan. 28, 2009, available at //

(Wendy Zeldin)

Back to Top

United Kingdom – Economic Stimulus Measures

With the United Kingdom in the midst of a recession, a comprehensive financial intervention was announced by Her Majesty’s Treasury Department in January 2009. The package is “designed to reinforce the stability of the financial system, to increase confidence and capacity to lend, and in turn to support the recovery of the economy.” These measures target UK lenders, aiming to increase their lending and thus improve consumer confidence in the economy.

The package adds to previous measures taken by the government to support the economy during the current downturn. Those measures were adopted in October 2008, when support was provided to protect the stability of the banking system and bank savings and deposits, and in November 2008, when a fiscal stimulus package to support businesses, homeowners, and consumers was included in the pre-budget report (Press Release, HM Treasury, Statement on Financial Intervention to Support Lending in the Economy (Jan. 19, 2009), available at _05_09.htm (external link))

(Clare Feikert)

For more information on Financial Stimulus Plan see:

Back to Top

Last Updated: 06/09/2015