Then the government warned it might have to turn off the gas.

A standoff with top supplier Russia over its demand to be paid in roubles – part of a wider economic tit-for-tat sparked by Moscow’s invasion of Ukraine – prompted Berlin to activate emergency plans on Wednesday that could eventually lead to gas rationing if Russia disrupts or halts supplies.

Heavy industry, which accounts for a quarter of German gas demand, would be hit first, threatening jobs and the country’s economic recovery from two years of pandemic.

“If we don’t get gas we’ll have to switch off,” Craig Barker, the managing director of Kelheim Fibres, whose fibres are used in everything from tea bags to tampons, told Reuters.

Kelheim exemplifies the Mittelstand – private, family run companies that span industrial sectors, employ nearly two out of three workers, and account for a third of corporate turnover.

Its gas bill is set to increase more than five-fold this year to 100 million euros ($110 million) – equivalent to more than half of its annual sales – as the conflict in Ukraine exacerbates an already tight energy market.

With no easy alternative sources of energy, and struggling to pass on costs to customers like Kimberly-Clark and Procter & Gamble, the crisis is putting the company’s future in doubt.

“The current situation is threatening our very existence,” said Wolfgang Ott, an executive at the 86-year-old firm which has 600 staff at its factory in the Bavarian town of Kelheim.

Kelheim has already applied to authorities to be treated as a systemically relevant firm, which would help it access supplies should gas rationing kick in. Its fibres are needed in several hygiene products.

RUNNING ON GAS

Moscow’s invasion of Ukraine has highlighted Germany’s heavy reliance on Russian gas – Russia accounted for 55% of Germany’s gas imports in 2021.

Alternative supplies won’t come cheap or fast. Berlin has warned it could take until mid-2024 until Germany can live without Russian gas.

That leaves companies, and the wider economy, exposed.

“Rising electricity and gas prices threaten to crush the economy,” said Siegfried Russwurm, president of Germany’s BDI industry association and chairman of Thyssenkrupp, which has warned it might have to introduce shorter working hours as soon as next week.

This, he said, raised the risk of companies considering moving production abroad to save costs.

Germany’s engineering and chemicals associations, the country’s second- and third-largest industry groups, have halved or scrapped their growth outlooks for this year in response to higher costs and supply chain issues.

German soda and natron maker Ciech Soda Deutschland, a unit of Poland’s Ciech SA which supplies glassworks as well as the pharma and automotive industries, is another stalwart of the Mittelstand suffering.

With additional gas costs of 22 million euros per month, it is bleeding money and may be forced to stop production, the economy minister of Saxony-Anhalt, the German state where Ciech Soda is based, warned in a recent letter seen by Reuters.

That would hurt nearby businesses that rely on its products, minister Sven Schulze wrote in the letter to German economy minister Robert Habeck, pleading for an emergency meeting to discuss the matter.

Ciech Soda Deutschland and the economy ministry declined to comment.

(Reporting by Christoph Steitz, Louisa Off and Erol Dogrudogan; Editing by Josephine Mason and Mark Potter)

Source: https://uk.finance.yahoo.com/news/europes-energy-crisis-sends-shockwaves-050540535.html

The post Europe’s energy crisis sends shockwaves through Germany’s industrial heart first appeared on Garner Ted Armstrong Evangelistic Association.

The combined tax income of central and regional government in Europe’s largest economy rose 10.2% in the first 11 months of the year, according to the report. Experts expect about a 9% rise for the full-year.

Still, the recovery that drove Germany’s rise in tax income has waned of late due to a fourth COVID-19 wave and supply bottlenecks, according to the report.

Supply chains that were broken by the pandemic are struggling to recover, partly because of fresh outbreaks and resulting restrictions on public life that continue to impact production and transport, the ministry said. Sea trade for example is continuously disrupted by quarantine measures in certain ports.

“The supply difficulties should last throughout winter and could weigh on retail as well as industry,” the ministry said.

Inflation, currently running at 5.2% – its highest rate in nearly 30 years – should ease slightly in the new year, it wrote.

Our Standards: The Thomson Reuters Trust Principles.

Source: https://www.reuters.com/world/europe/german-tax-take-continues-surge-supply-bottlenecks-drag-govt-2021-12-20/

The post German tax take continues to surge but supply bottlenecks drag -govt first appeared on Garner Ted Armstrong Evangelistic Association.

With ministers due to meet later to discuss further responses to the greatest public health crisis in a century, Altmaier added that pandemic relief aid for companies cannot be extended indefinitely.

“People have to show discipline,” the architect of Germany’s economic response to the pandemic told Deutschlandfunk radio. “We have to do more to reduce social contacts.”

In an indication of the severity of the pandemic’s economic impact, the percentage of companies using the state-backed furlough scheme rose to 28% in November, up from 24.8% the month before, the Ifo institute said.

Even though Germany has been in partial lockdown since the start of November, the number of new infections rose overnight compared to the same period last week to 11,169, the Robert Koch Centre for Infectious Diseases said.

While he promised that taxes would not be raised before the national election due late next year, Altmaier’s warnings on the economy echoed those of Chancellor Angela Merkel’s chief of staff Helge Braun, who said no amount of government aid could fully cushion companies.

While government stimulus might help most companies survive the crisis, “it still won’t pass without consequence,” he told Handelsblatt newspaper. There was still scope for more economic relief measures later in the summer, he added.

The post German ministers warn on pandemic’s economic impact first appeared on Garner Ted Armstrong Evangelistic Association.

German Chancellor Angela Merkel on Saturday assured businesses that they would receive additional support during the partial second-wave lockdown that begins next week.

In her weekly video podcast, Merkel said up to €10 billion ($11.6 billion) would be available to areas of the economy hit by the new coronavirus restrictions.

Her comments come amid concerns that thousands of firms may not survive a long winter lockdown, having already struggled to deal with the first wave of the pandemic despite unprecedented state support.

Read more: German economy bounces back to beat expectations

“Companies and businesses that have got into trouble through the current crisis through no fault of their own will not be left alone,” Merkel said. “We want to help quickly and unbureaucratically.”

She said the government would “continue to do everything necessary to limit the burden of the pandemic on the economy and thus also for jobs and our prosperity, while at the same time, protecting the health of all of us.”

Business leaders to grill chancellor

Merkel is due to hold talks on Wednesday with leading employers and industry associations to discuss “how we can further cushion the effects of the crisis.”

Last week, the chancellor announced a one-month partial nationwide lockdown to try to stem a surge in coronavirus infections which threatens to overwhelm the health system.

From Monday German residents are again ordered to work from home, where possible, restaurants and bars and other entertainment venues will close and unnecessary travel is strongly discouraged.

The country on Saturday recorded another record number of daily infections, announcing 19,059 cases in the previous 24 hours.

The figures released by the Robert Koch Institute (RKI) for disease control showed that almost a thousand people have died over the past month, taking the death toll to 10,452.

Read more: Death, mourning and the coronavirus: ‘No one should have to die alone’

Fresh demonstrations ahead of lockdown

Protests were held Saturday against the ongoing coronavirus curbs in Dresden, Karlsruhe, Darmstadt, Dusseldorf, Braunschweig and Munich.

Organizers of the Dresden rally — a group called Lateral Thinking — said several thousand protesters turned up.

As only 1,000 were registered, attempts were made to disperse people, many of whom did not wear masks.

In Karlsruhe, some 900 people joined a similar rally, which police threatened to shut down after attendees repeatedly failed to follow social-distancing guidelines.

Read more: Coronavirus: How the German military helps fight the pandemic

Theater staff in Munich created a human chain to highlight the severity of the measures’ impact on their work.

They held ribbons to ensure social distancing and underlined that they were not questioning the necessity of the restrictions but drawing attention to the needs of the arts sector.

Politicians have warned that an extension of the so-called lockdown light into December cannot be ruled out.

“It is very, very difficult to make long-term predictions,” Helge Braun, Minister in the Chancellery, told newspaper Bild.

mm/nm (AFP, dpa)

Source: https://www.dw.com/en/coronavirus-merkel-promises-to-shore-up-german-economy/a-55461398

The post Coronavirus: Merkel promises to shore up German economy first appeared on Garner Ted Armstrong Evangelistic Association.

Helge Braun, the head of Angela Merkel’s Chancellery, warns in an interview of a possible exponential rise in the number of coronavirus cases. He warns of the risk of long-term economic damage if Germany can’t keep the number of cases under control.

Helge Braun is the head of the German Chancellery – Foto: Andreas Chudowski / DER SPIEGEL

DER SPIEGEL: Mr. Braun, are we still in the beginning of the second wave of the coronavirus pandemic, or are we already in the middle of it?

Braun: We are currently seeing a widespread increase in infections, and we have experienced an extreme rise in large cities like Berlin and Bremen.

ANZEIGE

DER SPIEGEL: What do you intend to do?

Braun: We still need a mix of different measures. Generally, though, we can say that the freedoms we had over the summer can’t be fully maintained throughout autumn and winter. Overall, the caution among the populace needs to rise again. At the same time, we have to proceed with precision in individual hotspots and impose temporary restrictions, an approach we have had good experiences with so far. We are more concerned about the development in individual large cities where there is a diffuse infection pattern. We need determination.

DER SPIEGEL: Meaning?

Braun: In cities like Berlin, it’s not about limiting or slowing down the increase. Rather, the goal has to be quite clear: to return to an incidence rate below 50 – meaning significantly less than 50 new infections per 100,000 inhabitants in a week.

DER SPIEGEL: Is the Berlin city-state government acting with enough urgency?

Braun: I have decided not to give individual grades. But every mayor and every city council of an affected city must work hard to bring about a reversal. It will take 10 days, anyway, before the measures show an effect, but then these figures really must go down. And that requires determination. Expanded mask obligations don’t go far enough – there also have to be restrictions, particularly for celebrations and events, which are the most relevant driver of infections right now. A wedding in autumn 2020 cannot be a big wild celebration. It can be made up for next year.

DER SPIEGEL: Was our political leadership too careless? Did the summer create a false sense of security?

Braun: The development could not have been predicted in this way. When the travel season began, the numbers were low across the board. But this is what happened next: Our neighboring countries loosened things, even in places where the public health service isn’t as effective as here. The numbers shot up there very quickly – and that led to a renewed increase in cases here. In August, 50 percent of our infections were due to people who had traveled abroad. This, of course, created a bad starting point for the autumn.

DER SPIEGEL: You say that it couldn’t have been foreseen, but any layman could have predicted such a thing.

Braun: Once again: The figures weren’t just low in Germany – they were so low across all of Europe that there was simply no justification for prohibiting people from taking their summer holiday. Still, even then I was worried about the travel. It’s no secret that mobility is a major factor in the spread of a disease like this.

DER SPIEGEL: Do summer vacations, parties and weddings mean that schools and daycare centers will have to be closed again?

Braun: There is no reason to see things in such sweeping terms as was necessary in the first half of the year when we knew so little about the virus. We should avoid that at all costs. Educational institutions should be the last things to close, not the first.

DER SPIEGEL: This interview is taking place in Berlin’s Mitte district. If we wanted to travel from here, we wouldn’t be allowed to stay overnight in Bavaria, but we could in Bremen, given that many states have banned hoteliers and operators of other tourist accommodation facilities from hosting people from Berlin. How are people supposed to understand that?

Braun: On Wednesday, I had a long discussion with the chiefs of staff of German state governors about which measures are the right ones. It was important to me that not everyone draws their own conclusions. The ultimate result is the tourist accommodation ban, which is the milder remedy relative to entry bans and quarantine orders. Some states were opposed even after much wrangling, but a completely uniform approach wasn’t possible in this situation. We are all aware that it creates many problems.

DER SPIEGEL: Those wanting to travel despite the accommodation ban must present a negative coronavirus test result that is no older than 48 hours. Doesn’t that mean that tourists will be taking test capacity away from patients who need it?

Braun: The states and the federal government are urging people in risk areas to avoid traveling this autumn if possible. It’s clear, for example, that in Berlin districts with a high caseload, there isn’t enough capacity to allow all vacationers to take a test punctually before their departure. We have completely different priorities.

DER SPIEGEL: Where do those priorities lie?

Braun: Our focus right now is enabling people to continue working, keeping schools and training centers open, and keeping our health-care system functional. Everything else will have to take a back seat this autumn and winter. It won’t be easy, that is clear to me.

DER SPIEGEL: What prospects can you offer?

Braun: The signals coming from vaccine research are very optimistic. There is hope that we can gradually normalize everyday life next year. Before that, we have to be careful to ensure the economy doesn’t get into a situation like in the spring. It would be hit very hard and we would also have a great disadvantage compared with countries like China and South Korea, which have been very disciplined and are on the right track economically. You can see that positive economic developments and low infection rates go hand in hand.

DER SPIEGEL: But the economy also includes the tourism sector, in addition to things like catering, events, and culture. What about them?

Braun: These are the industries that are particularly affected at the moment. We have to help them through this difficult time with government support. It would be mistaken, however, to allow a kind of normality in those sectors that isn’t possible at the moment. That would only lead to the entire economy grinding to a halt.

DER SPIEGEL: Is it still even possible to prevent a loss of control?

Braun: Yes. But we are threatened by a second wave if we don’t act very quickly and very, very decisively now. This means that restrictions and rules also have to be enforced – through controls and heavy fines, for example. It’s not a trivial offense if restaurant guests don’t provide their contact details or enter made-up names and the health authorities then have to spend days trying to reconstruct infection chains that should actually be clear at a glance.

DER SPIEGEL: Does a curfew such as the one that has now been introduced in Berlin, where bars, restaurants, and stores must be closed between 11 p.m. and 6 a.m., really make sense?

Braun: Yes. I think it is right and important. We all know from experience that people become more carefree the more alcohol is involved. That’s why I think it’s good to stop at a certain time of day.

DER SPIEGEL: Doesn’t that drive people to places indoors where controls are no longer possible?

Braun: Basically, the most important thing in this crisis is the willingness of people to do their part and be careful. All I can do is appeal to each individual to not always think only about what is allowed and what is being checked, but rather to ask themselves: What can I do to protect myself most effectively? And how do I best help to prevent the spread of the disease and protect others who are at a higher risk of developing severe symptoms?

DER SPIEGEL: The president of the United States, who has himself been infected, says we shouldn’t let the virus control our lives. And German virologist Hendrik Streeck has warned against over-dramatizing it. Are German politicians exaggerating?

Braun during his interview with DER SPIEGEL journalists Christoph Hickmann and Martin Knobbe at the Chancellery in Berlin: “I am very, very optimistic that we will have a vaccine next year.” – Foto: Andreas Chudowski / DER SPIEGEL

Braun: A look abroad explains everything. In countries that have lost control of the number of infections, the economy is also suffering dramatically. And at some point, the health care system gets overwhelmed. No country can say: We can handle it. Ultimately, tough restrictions will come anyway.

DER SPIEGEL: Virologist Streeck says that even the almost 20,000 new infections per day predicted by Chancellor Angela Merkel would be manageable because it’s mostly younger people who are getting infected, for whom the symptoms are milder. Is he right?

Braun: Over the summer, it tended to be younger people who dared to go on vacation. Older people are much more cautious of their own accord and are less likely to become infected, which explains why we have so few serious cases at the moment. But when the infection rates get very high, it becomes increasingly difficult to protect the most vulnerable groups. And it increases the risk of infection, in nursing homes, for example. The idea that we can control infections when they get to high levels is wrong. So, we have a choice: Either we keep it low and the health authorities can handle it. Or we lose control, and the virus spreads very rapidly through the population.

DER SPIEGEL: The concept of herd immunity, meaning as many as possible must get sick in order to then be immune from the coronavirus, is off the table?

Braun: To stop the virus in this way, more than half of all Germans would have to go through the infection. Even if you had a period of one and a half years for that to happen, 80,000 people would have to be infected every day. In that case, I don’t think we would be able to say that our health-care system could easily cope with such a thing. If we had the feeling that it was hopeless anyway and that we would soon get a vaccine, then we could consider a different approach. But there is a real chance, and that’s why we have to keep infection rates low over the winter.

DER SPIEGEL: What number is going to make you really nervous? At what point can the curve no longer be reversed?

Braun: There isn’t a single number. What would be alarming is exponential growth because it would mean losing control of the chains of infection. We need to keep infections under control, meaning: We inform the contacts and send them into quarantine early enough that one person, at most, will infect one other person.

DER SPIEGEL: And if that’s not successful, there isn’t much else that can be done?

Braun: Then one person infects an average of three to five others and it goes up rapidly. That’s why what we have seen in Berlin Mitte in recent days, namely exponential growth, is really alarming.

DER SPIEGEL: How certain are you that we can actually hope for a vaccine next spring? We’ve heard before that a vaccine might even be ready this autumn.

Braun: You can’t promise anything. We can currently see that there are quite a number of vaccines that are already being tested on humans and that they actually deliver immunity. There can always be setbacks with individual vaccines, and not all of them will be approved. But given that there are so many and that the first companies are entering into the approval process, I am very, very optimistic that we will have a vaccine next year.

DER SPIEGEL: But that’s not the end of the story. At that point, as many as possible will need to be vaccinated.

Braun: Then it will certainly take several months before we get enough vaccine and administer it. We are already making logistical preparations, and we are addressing the question as to who should be vaccinated and when. We have commissioned the Standing Vaccination Commission at the Robert Koch Institute (Germany’s center for disease control) to answer these questions at an early stage together with the German National Academy of Sciences Leopoldina and the German Ethics Council.

DER SPIEGEL: So far, we have not seen higher than normal mortality through the coronavirus, so there haven’t been more deaths than usual in Germany, despite the pandemic. Is the virus less lethal than initially thought?

Braun: No, I don’t think so. Think of the images from the Heinsberg district (Eds: the first region in Germany to get hit heavily by the coronavirus) and the higher mortality rate at the time. In the meantime, our health-care system is doing exemplary work. In contrast to the beginning, we have comparatively fewer cases in retirement homes. And the elderly population is being extremely cautious. In addition, social distancing rules are also preventing all other autumnal infectious diseases from spreading rapidly.

DER SPIEGEL: You warned in an interview with DER SPIEGEL in March that the behavior of the population would be closely scrutinized. What is your appeal to Germans this fall?

Braun: I recall the chancellor’s appeal at the end of her budget speech: It’s up to all of us now. We cannot enjoy all the liberties this autumn and winter that we have enjoyed in other years. We have to be more careful. Then the world will look very different in the spring. And then there’s the chance that Germany will emerge really well from this crisis.

DER SPIEGEL: But isn’t it also possible that the coronavirus will be a crisis without end?

Braun: If we don’t maintain discipline this autumn and the economy collapses again, we will continue to feel the economic effects for a very long time. If that happens, the crisis will have a very long and sad end. That would be a terrible pity.

DER SPIEGEL: Could air purifiers help us get through the winter better?

Braun: Yes, we have launched a 500 million program for the conversion of filter systems, because modern filter systems in particular rely heavily on recirculated air. This can be very favorable for energy savings, but not so favorable for fighting viruses.

DER SPIEGEL: What about mass testing for the coronavirus?

Braun: Simply conducting blind testing doesn’t make sense in many places. There will now be rapid tests, but you also need medical personnel for them. And they carry a different meaning. They can determine if I am acutely contagious, but they can’t tell us if someone is infected and will only become contagious afterward. And even there, the capacities also won’t be unlimited this winter. That’s why they need to be prioritized for use in the health-care sector and in schools and daycare centers.

DER SPIEGEL: Do you wish you could go back to March, when the state governors were still making decisions in tandem with you and the chancellor? That’s no longer the case.

Braun: It is a constant struggle to find uniform standards. Not everything has to be the same, but it does need to be comparable. And we are still managing that for the most part.

DER SPIEGEL: Mr. Braun, we thank you for this interview.

Source: https://www.spiegel.de/international/germany/merkel-s-chief-of-staff-on-the-need-for-increased-coronavirus-restrictions-a-c0741a29-ea49-42af-82dd-35782c1cbbe0#ref=rss

The post “We Are Threatened By a Second Wave If We Don’t Act Very Quickly” first appeared on Garner Ted Armstrong Evangelistic Association.

The overall debt from federal government, regional states, municipalities and social security funds ballooned to 2.1089 trillion euros ($2.46 trillion) during the first half of the year, the Federal Statistics Office said.

That was an 11% increase compared to the previous six months and beat the previous record reached at the end of the second half of 2012, it added.

“The increase is mainly due to the fact that the public budgets borrowed funds for the purpose of financing measures to overcome the coronavirus crisis,” the office said.

The German cabinet last week approved Finance Minister Olaf Scholz’s draft budget for next year which envisages net new debt of 96.2 billion euros to finance further measures to tackle the coronavirus crisis.

The additional borrowing marks the second-highest amount of net new debt in Europe’s largest economy since the end of World War Two and comes after the government already took on record high borrowing of some 218 billion euros this year.

Scholz is expected to discuss the 2021 draft budget with lawmakers in the Bundestag lower house of parliament later on Tuesday.

The post Germany’s debt hits record high due to fiscal splurge in pandemic first appeared on Garner Ted Armstrong Evangelistic Association.

The EU’s largest economy is preparing for an economic downturn as German consultant Professor Roland Berger said millions would be left out of work. While a survey of 7,000 German companies by Munich Ifo Institute found a fifth (21 percent) sees their own existence threatened due to the coronavirus crisis.

Free Democratic Party leader Christian Lindner said the coronavirus crisis had acted like a “fire accelerator” to Germany’s economic woes, saying: ”We are in a very critical situation”.

Meanwhile, the survey found travel agencies and tour operators in Germany are worried about their future with 85 percent saying their existence is at risk.

While 76 percent of hoteliers fear for their company.

Angela Merkel has been delivered a blow (Image: GETTY )

Germany’s economy has been crippled by the coronavirus crisis (Image: GETTY )

However, it is good news for the chemical industry, with only six percent of companies concerned about their future and just two percent in the construction industry.

Economic experts warned of an “insolvency wave” in the next coming months.

Roland Berger warned of the long-lasting damage to the German economy, telling BILD: “There is a risk that we will have between four and five million unemployed.

READ MORE: Brexit warning: UK told Angela Merkel will NOT help secure trade deal

Angela Merkel’s nation faces a wave of bankruptcies (Image: GETTY )

“If a pub with three waiters goes bankrupt, there will be three unemployed who will be in the statistics for a long time.

“Because these are not jobs that will be rebuilt the day after tomorrow.”

Angela Merkel’s nation has already seen the coronavirus pandemic cost thousands of jobs.

German companies say they are worried about their future (Image: GETTY )

Germany returns to some normality in the wake of the coronavirus lockdown (Image: GETTY )

According to the Employment Agency (BA), the number of unemployed stood at 2.8 million in June – around 637,000 more than a year earlier.

Ifo boss Clemens Fuest warned, “the number of unemployed will rise to around three million in the third quarter”.

It comes after the EU Commission warned Germany would be hit by a downturn of -6.3 percent from -6.5 percent forecast in May and next year’s rebound.

The report also warned the eurozone economy would drop deeper into recession this year and rebound less steeply in 2021 than previously thought, with France, Italy, and Spain struggling the most due to the COVID-19 pandemic.

The EU executive said the 19-nation single currency area would contract by a record 8.7 percent this year before growing by 6.1 percent in 2021.

In early May, the Commission had forecast a 2020 downturn of 7.7 percent and a 2021 rebound of 6.3 percent.

Meanwhile, German Chancellor Ms Merkel will meet with Spanish Prime Minister Pedro Sanchez ahead of a July 17-18 summit to discuss a planned European Union recovery fund.

Spanish government spokeswoman Maria Jesus Montero said: “Spain’s future is at stake in the coming days,” regarding the negotiations over the fund, from which Spain hopes to receive around €140 billion.

Additional reporting by Monika Pallenberg

Source: https://www.express.co.uk/news/world/1306239/angela-merkel-news-germany-economy-germany-coronavirus-news-merkel

The post Merkel devastated as Germany threatened by bankruptcy wave – 5 million at risk first appeared on Garner Ted Armstrong Evangelistic Association.

People wearing face masks walk in front of a euro sign in Frankfurt am Main, Germany, on April, 24. YANN SCHREIBER/AFP/GETTY IMAGES

Germany’s fiscal prudence hasn’t made the country popular. Over the past several years, economists have written countless op-eds blaming Germans for sucking demand out of the world economy. For example, the economist Paul Krugman has argued that “the whole world has a Germany problem.” The combination of Berlin’s “ruinous obsession” with balanced budgets and its considerable exports creates excess savings that need to be invested abroad. That, in turn, creates large trade imbalances with nations that take in the investments. Debtor countries such as France and the United States have thus argued that Berlin needs to loosen its purse strings to address global economic imbalances.

Now, if COVID-19 has done any good, it is that it has put such calls on standby. On June 3, German Chancellor Angela Merkel’s coalition government presented a 130-billion-euro ($145 billion) fiscal stimulus package worth 4 percent of German gross domestic product over two years. Coming on top of direct transfers to companies and employees starting during the lockdown, Germany’s fiscal response to the pandemic amounts to a whopping 13.3 percent of GDP. Berlin is finally spending.

Compare Merkel’s response this time to her policies during the 2008-2009 financial crisis. In those years, she reluctantly accepted the need for stimulus of under 2 percent of GDP over two years only after the economy had been contracting for three consecutive quarters. In the COVID-19 crisis, by contrast, Berlin has already put forward the second fiscal plan just three months after the first German COVID-19 fatality.

Beyond attempting to right the German economy, the stimulus spending will yield spoils for Germany’s EU partners. To see how consider not only the size but also the composition of Berlin’s latest national fiscal stimulus package. First, it dwarfs other euro area countries’ plans. France’s fiscal measures to date amount to mere 3.6 percent of GDP by comparison.

Further, with its focus on consumption incentives and government spending, the German stimulus will have knock-on effects on imports from other European countries. If German households, corporations, and the public sector buy more, demand for foreign goods will also increase. When the EU’s largest economy is spending big, not only German boats are lifted. Finland’s finance minister, for one, has noted that Helsinki should be “very grateful” for Germany’s national fiscal stimulus plan. “This sacrifice by German taxpayers will help us incredibly much,” the minister said this month.

What’s more, as Berlin taps into debt markets, it will also make it easier for the European Central Bank (ECB) to keep on financing the eurozone’s most indebted members. The reason is that the ECB is required to balance its asset purchases of government bonds among the 19 member states of the currency union. If there are more German treasuries on the market, it is easier for the ECB to buy treasuries from other nations.

By spurring imports into Germany and boosting investments, Merkel’s stimulus package is also a start to correct some long-standing economic imbalances within the EU. The flip side of Germany’s excess savings and export surplus that draws the ire of Washington and Paris is weak consumption and chronic underinvestment. Since the 2000s, investment by the public and the corporate sector as a percentage of GDP has fallen and been much below other eurozone countries.

The fiscal stimulus tries to tackle this structural problem. On the federal level, the plan outlines a public investment initiative to help Germany transition to a more climate-friendly economy, improve its health and education infrastructure, and even spur research in areas from artificial intelligence to quantum computing. At the sub-federal level, Berlin aims to alleviate structural bottlenecks to public investment by taking on the provision of more social benefits that had been paid by the municipalities. This frees up much needed fiscal space in poorer regions that have put off investments in the past.

Berlin’s investment priorities are aligned with the EU’s strategic sovereignty and climate agenda. Berlin aims to spend more than 7 billion euros ($8 billion) on fifth-generation telecommunications infrastructure and research alone. Another 9 billion euros ($10 billion) is earmarked to fund a hydrogen industry, with $2 billion of that slated for investment abroad. The plan also lifts caps on subsidies for solar energy and increased funding to upgrade shipping of liquefied natural gas. Other priorities are cybersecurity, health, and armaments procurement.

Finally, the stimulus may foreshadow a broader structural shift away from Berlin’s focus on Germany’s export-oriented businesses. Despite some pressure to do so, Merkel did not yield to business demands for a cut to the corporate tax rate. German corporations are already cash-rich. Profitability is not the problem; underinvestment is.

The chancellor even stood firm against demands for aid to the auto industry in the form of a scrappage scheme for internal combustion-engine cars. In 2009, Berlin helped jump-start car sales by handing out 2,500 euros to buyers that returned their older ones. Her refusal to repeat the scheme is remarkable. Auto executives and trade union leaders have German politicians on speed dial. But environmental concerns, along with a realization that blindly subsidizing Germany Inc. is not the way forward, outweighed vested interests.

Source: https://foreignpolicy.com/2020/06/22/germany-covid19-pandemic-stimulus-spending-savings-glut-europe/

The post Germany Is Finally Ready to Spend first appeared on Garner Ted Armstrong Evangelistic Association.

The German Chancellor has a record of defying orthodoxies and the Covid-19 crisis cries out for extraordinary steps

The post Why Angela Merkel is coming to the rescue in Europe first appeared on Garner Ted Armstrong Evangelistic Association.

With the coronavirus pandemic unleashing a wave of job losses, bankruptcies and factory closures across the world, Germany’s GDP is due to shrink 6.3% in 2020, the government announced on Wednesday.

“We will experience the worst recession in the history of the Federal Republic” which was founded in 1949, Economy Minister Peter Altmaier said.

The economic blow would surpass the one left by the global crisis of 2009, which saw Germany’s economy shrink by over 5%.

Short-hours scheme for German workers

Altmaier said the nation’s economy is set to hit its lowest point before the end of June and then start growing again with 5.2% growth projected in 2021. He also warned that the government cannot restart the economy with a single stroke and risk the success achieved in combating the pandemic.

“Only if we lift economic and social restrictions step-by-step, and with a sense of proportion, can we start with the slow recovery in the second half of the year,” Altmaier said.

Read more: Coronavirus to cause ‘structural’ economic change

Germany’s export-oriented economy is also set to shed hundreds of thousands of jobs before the end of the year, putting the jobless rate at about 5.8% or around 2.62 million compared to its previous average of 2.27 million. Berlin has pushed multiple measures to mitigate the fallout.

According to Altmaier, around 3 million workers have already been placed on a short-time work scheme that sees employees reduced hours to avoid layoffs, and the government boosting the workers’ salaries.

‘Those are not really forecasts’

Commenting on Altmaier’s statement on Wednesday, however, the head of the German Institute of Economic Research (DIW) dismissed them as “wishful thinking.”

“Those are not really forecasts, those are scenarios… scenarios assuming that there is no second wave of infections, assuming that there is no new lockdown in the future,” Marcel Fratzscher told DW. “That’s wishful thinking — that the economy will recover next year. Clearly the answer to how will the economy get out of recession depends very much on the pandemic itself.”

At the same time, Fratzscher praised the government’s approach to helping mitigate the impact, saying that the Cabinet “has already done a lot in this first stage of this lockdown.”

“Hardly any government in the world has spent more money on stabilizing the economy, providing support to companies, direct financial transfers, huge guarantees for bank loans, particularly to small-to-medium-sized enterprises.”

Several large companies, including Adidas, Condor airline, and TUI travel company have already taken out massive government-backed loans. The country’s flagship carrier Lufthansa is still negotiation its bailout.

Source: https://www.dw.com/en/germany-faces-huge-economic-slump-due-to-coronavirus-pandemic/a-53286176

The post Germany faces huge economic slump due to coronavirus pandemic first appeared on Garner Ted Armstrong Evangelistic Association.