Chancellor Angela Merkel’s conservative bloc (CDU/CSU) and its centre-left coalition partner, the Social Democratic Party (SPD), agreed late Wednesday to allow businesses to offset their losses in 2020 and 2021 against profits from previous years in tax returns.

“We are strengthening many small and medium-sized enterprises, on whose competitiveness we depend so that the economy can pick up speed more quickly after the crisis,” Economy Minister Peter Altmaier said.

The measure, which amounts to a tax cut for struggling businesses, is expected to cost the state less than a billion euros, Finance Minister Olaf Scholz told the Deutschlandfunk radio broadcaster.

Special measures were also extended for restaurants, which have been closed since November to stem infections. A reduced value-added tax of 7 per cent instead of 19 will now apply for them until the end of next year.

This is “good news for many pubs and restaurants that have been hit particularly hard by the pandemic,” Altmaier said.

Culture Minister Monika Gruetters also welcomed the decision to double aid for the cultural sector to 2 billion euros.

“I thank the coalition committee for sending this important signal for culture,” she wrote on Twitter.

Ralph Brinkhaus, head of the CDU’s group in parliament, called the coalition meeting “very harmonious.”

The parties are however eyeing national elections in September and the SPD has already named Scholz as its top pick to succeed Merkel, who is set to retire from politics.