With borders slamming shut, employees kept home, and shops and restaurants forced to close to halt transmission of the coronavirus, Germany is headed for the worst recession in its post-war history. In light of increased unemployment, Europe’s biggest economy is facing unprecedented challenges with the coronavirus pandemic.
Latest data released on Wednesday June 3rd, showed that the unemployment rate rose to 6.3% in May, (around 2.8 million people), from 5.8% in April. Noting that millions of employees in Germany have been put on shorter working hours, Merkel said that “shows how fragile the whole thing is, and why we must succeed in giving the economy a push so that jobs can be secured.”
Under the sweeping measures value-added tax will be temporarily abandoned and families will receive €300 for each child, while those who purchase electric cars will see a government rebate doubled to €6,000. Unveiling the programme Chancellor Angela Market commented “the size of the package will reach €130bn for 2020 to 2021, €120bn of which will be borne by the federal government.”
With new infections sharply dropping, Europe’s biggest economy began easing social restrictions in early May, allowing shops to reopen while restaurants and tourist businesses have been taking the first tentative steps. However, in many of the 16 regions in Germany (which vary in their timing of reopening), there is little appetite for dining out or going to a bierhaus.
Factories too are restarting their production lines. Merkel has said the support programme will help “the economy to find its feet and grow again.” Meanwhile, companies in sectors hardest hit by the crisis – including hospitality, tourism and entertainment – will receive “bridging help” worth €25bn in total from June to August. Under the measure, restaurants, hotels and event management companies may get up to 80% of their fixed operating costs reimbursed (if revenues had dropped by more than 70% compared to 2019). Merkel added: “We have an economic stimulus package, a package for the future and in addition, we’re now dealing with our responsibility for Europe and the international dimension.”
The fresh stimulus comes on top of a massive €1.1tn rescue package already agreed in March, comprising loan guarantees, subsidies and a shorter-hours programme to avoid job cuts. To fund the extraordinary series of financial developments, parliament had approved new borrowing, marking a drastic change in German economic policy.
