German economy minister: Help is on the way

Peter Altmaier (CDU) has called the economic aid against the COVID-19 pandemic "generous." [EPA-EFE | Hayoung Jeon]

The first payments from the ‘coronavirus aid package’ are to be made to small and micro enterprises this week, Economy Minister Peter Altmaier announced on Tuesday (24 March) but rejected once again the idea of European coronabonds. Meanwhile, the country’s top economic expert sees a single-digit percentage GDP decline. EURACTIV Germany reports.

Economy Minister Peter Altmaier from Angela Merkel’s Christian Democratic Union (CDU) gave a press conference on Tuesday (24 March) to specify once again the coronavirus package of measures to support affected companies.

Lars Feld, head of the Economic Advisory Council, a highly influential group also known as “economic wise men,” also took part by via video link and praised the government’s measures.

Right at the start, Altmaier stressed the seriousness of the situation: Germany is in a difficult economic situation, he said, and the losses will be “higher than in the last economic crisis. He said the priority is to support companies that are acutely threatened, but we must already think about how to generate the upswing after the crisis.

Germany set to foot massive but 'necessary' coronavirus bill

Coronavirus will cost Germany several hundred billion euros, according to new figures from research centre the ifo institute released on Monday (23 March). Production losses and unemployment will hurt, so Berlin will have to dig deep into its pockets. EURACTIV Germany reports. 

More optimistic than the German Institute for Economic Research (ifo)

Lars Feld did not want to rule out the need for further liquidity measures. Especially in the period after the crisis, he said, the government will still have to boost the economy. If the right measures are taken, an upswing after the slump is realistic.

As far as the magnitude of the slump itself is concerned, Feld said he was somewhat more optimistic than his colleagues from the economic institute ifo, who had presented their forecast the day before. They spoke of an economic decline of between 7.1 and 20.6 percentage points.

Feld believes it is possible to remain in the single-digit range, as long as the recovery progresses from the third quarter of the year onwards. He gave a simulated calculation: if the shutdown were to last seven weeks, followed by five weeks of recovery, one would be roughly aware of the impact of the financial crisis.

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“Never been there before”

Commenting on the measures, Altmaier said the entire economy had been given a wide array of offerings and it was now important that companies can quickly take advantage of them. The disbursement of initial aid grants to small and micro-enterprises is to start this week, at least in some German states.

Altmaier had particularly kind words for the updated short-term hour reduction measures. The government’s recently approved plan makes it easier for employers to temporarily reduce their employees’ hours.

He called this updated plan “generous,” and something that “has never happened before.” The current pot of money is open to all companies without exception, and all 45 million jobs subject to social security contributions are covered. A flood of applications is expected as this would allow all companies that have now closed to continue paying their employees.

This, of course, only solves one of the problems that business people face when they lose all their income. In addition to decreased salaries, there are other fixed costs, such as rent, taxes or loan repayments.

To that end, the government wants to defer taxes and ban loan enforcement. However, Altmaier made it clear that loans will have to be repaid at some point, just as the German government will have to repay the debts it is now taking on.

Germany and Netherlands 'open' to considering ‘coronabonds’ 

Germany and The Netherlands, two of the most staunch opponents to the idea of issuing common debt in the eurozone, would be “open” to discuss eurobonds to mitigate the economic impact of the coronavirus COVID-19.

No to “coronabonds” 

Altmaier once again rejected the idea of European “coronabonds.” Behind this lies the old idea of “eurobonds,” a hitherto fictitious form of investment, which could ultimately be used to distribute the debts of EU countries among all member states.

Altmaier has so far rejected it and warned against “ghost debates,” as he did today in response to a question from a journalist.

He emphasized the importance of European solidarity, if only because of the close interdependence of national economies, but said that the situation should not be exploited for ideological strategy changes.

[Edited by Zoran Radosavljevic]

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