The first installments of the “coronavirus aid package” are to be paid to small and micro businesses this week, Economy Minister Peter Altmaier announced on Tuesday (March 24), but again rejected the idea of European coronabonds. Meanwhile, the nation’s top economic expert sees a single-digit percentage drop in GDP. EURACTIV Germany reports.
Economy Minister Peter Altmaier of Angela Merkel’s Christian Democratic Union (CDU) gave a press conference on Tuesday March 24 to once again clarify the package of measures against the coronavirus to support affected companies.
Lars Feld, head of the Economic Advisory Council, a highly influential group also known as “economic sages”, also participated via video link and praised the government’s measures.
Right from the start, Altmaier underlined the seriousness of the situation: Germany is in a difficult economic situation, he said, and the losses will be “higher than during the last economic crisis. He said the priority is to support businesses that are at high risk, but we already have to think about how to generate recovery from the crisis.
More optimistic than the German Institute for Economic Research (ifo)
Lars Feld did not want to rule out the need for new liquidity measures. Especially in the post-crisis period, he said, the government will still have to revive the economy. If the right steps are taken, a recovery from the crisis is realistic.
As for the scale of the crisis itself, Feld said he was a little more optimistic than his colleagues at the ifo economic institute, who had presented their forecasts the day before. They spoke of an economic decline of between 7.1 and 20.6 percentage points.
Feld believes it is possible to stay in the single-digit range, as long as the recovery progresses from the third quarter of the year. 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.
“Never been there before”
Commenting on the measures, Altmaier said the whole economy had received a wide range of offers and it was now important that businesses could quickly take advantage of them. The disbursement of initial aid grants to small and micro businesses is due to start this week, at least in some German states.
Altmaier had particularly kind words for the updated short-term hours reduction measures. The plan recently approved by the government allows employers to temporarily reduce the hours of their employees.
He called this updated plan “generous” and something that “has never happened before”. The current kitty is open to all companies without exception, and the 45 million jobs subject to social security contributions are covered. A flood of applications is expected because this would allow all companies that are closed today to continue to pay their employees.
This, of course, solves only one of the problems that business people face when they lose all their income. In addition to salary cuts, there are other fixed costs, such as rent, taxes or loan repayments.
To this end, the government wants to defer taxes and prohibit the execution of loans. However, Altmaier has made it clear that the loans will have to be repaid at some point, just like the German government will have to repay the debts it is currently running.
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 eventually be used to distribute the debts of EU countries among all member states.
Altmaier has so far dismissed it and warned against “ghost debates”, as he did today in response to a reporter’s question.
He stressed the importance of European solidarity, if only because of the close interdependence of national economies, but said the situation should not be exploited for changes in ideological strategy.
[Edited by Zoran Radosavljevic]