Germany paves way for unprecedented aid as coronavirus slams economy

Germany’s government on Monday approved an unprecedented aid package to help save jobs and companies in the face of the coronavirus crisis, amid warnings that the country is headed for a recession.

“We will with all our might try to stop this crisis from putting into question either healthcare for our citizens or the economic processes of this country,” said Finance Minister Olaf Scholz following the cabinet decision.

The move paves the way for a record supplementary budget of 156 billion euros (167 billion dollars) in new debt. The sum will cover both 122 billion euros in aid and an expected drop of around 33.5 billion euros in tax revenues.

The wide-ranging aid measures, which parliament is expected to vote into law on Friday, are designed to help families, employees, tenants, the self-employed and firms hit by the coronavirus outbreak.

Small companies and solo self-employed workers such as artists and caregivers are to receive direct subsidies of up to 15,000 euros over three months.

Large companies will have access to capital through a stabilization fund and can be subjected to state intervention if needed. The KfW development bank on Monday also launched an unlimited special loan programme.

Property owners will no longer be allowed to evict tenants who cannot pay because of the coronavirus crisis. Welfare applications will be made easier. Expanded rules on short-time work are meant to help keep people employed.

Germany’s hospitals will be supported with more than 3 billion euros (3.2 billion dollars).

Clinics will receive a bonus for new intensive-care treatment units with artificial respiration, and supplements to help cover extra costs related for instance to protective gear.

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The measures were approved amid yet-to-be-confirmed signs that the increase of coronavirus cases in the country may be starting to slow down, according to the government’s disease control agency.

But there are also mounting warnings about the outbreak’s economic impact on Germany, Europe’s largest economy.

“The slide into a pronounced recession cannot be prevented,” the country’s central bank, the Bundesbank, warned on Monday in its monthly report for March.

The measures introduced to contain the outbreak are having massive economic consequences and an economic recovery will only take place once the pandemic threat has been effectively stemmed, it said.

Most affected are domestically oriented, consumer-related services that had so far bolstered the German economy, such as the hospitality sector, the entertainment industry, trade fairs and airlines. The demand for German exports is also expected to fall.

The Munich-based ifo research institute, meanwhile, said on Monday that the coronavirus crisis could cost Germany more than 500 billion euros and over 1 million jobs.

“The costs will probably exceed everything we have seen from economic crises or natural disasters in Germany in recent decades,” ifo president Clemens Fuest said in a statement.

“It is worth devoting virtually every conceivable sum to health policy measures,” he added.

Economy Minister Peter Altmaier predicted after the cabinet meeting that Germany’s gross domestic product could fall as much as it did during the 2009 financial and banking crisis, when it slumped by 5.7 per cent.

Chancellor Angela Merkel called into the meeting since she is in home quarantine, after having had contact with a doctor who then tested positive for coronavirus.

The chancellor was herself tested on Monday and was awaiting the result, her spokesman Steffen Seibert said.

“The chancellor is doing well,” he told reporters. “Now we are waiting for the result and will then see what follows.”

Seibert could not say when the test result would arrive. (dpa)