Germany agrees to more cash to shield workers, companies from coronavirus hit

Newly made Volkswagen vehicles are loaded on train in front of the Volkswagen (VW) factory in Zwickau, Germany, 2 April 2020. According to reports, Volkswagen will resume production in Zwickau on 23 April. [Filip Singer/EPA/EFE]

Germany’s coalition parties on Thursday (23 April) agreed to further measures worth some €10 billion to shield workers and companies from the impact of the coronavirus pandemic.

The aid package includes higher state transfers for people in short-time work schemes, according to a document agreed by senior members of Chancellor Angela Merkel’s ruling coalition.

The parties agreed to temporarily lower the tax burden for the catering industry through a reduced VAT rate of 7% for food and to give tax relief for small companies by simplifying loss carry forward.

The package also envisages increased financial support of the federal government worth €500 million for schools and pupils to boost e-learning and digitalisation.

“Germany has successfully slowed down the COVID-19 pandemic through drastic restrictions. This has significant economic and social consequences,” the coalition parties said in a joint statement issued after more than seven hours of negotiations.

“Nevertheless, we can only loosen the restrictions in small steps, because the virus is still widespread in Germany and we must not jeopardise success by another exponential wave of infections,” the parties said.

The package will allow the government to keep financial means for future measures, the parties said, suggesting that the government wants to keep some of its fiscal powder dry in the event of another escalation in the outbreak.

Germany has already approved an initial rescue package worth over €750 billion to mitigate the impact of the coronavirus outbreak, with the government taking on new debt for the first time since 2013.

The first package agreed in March comprises a debt-financed supplementary budget of €156 billion and a stabilisation fund worth €600 billion for loans to struggling businesses and direct stakes in companies.

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