Like other European countries, Germany is in the grip of the novel coronavirus (COVID-19), which has become a global pandemic. But how has the coronavirus impacted Germany’s economy?
This live coronavirus article has been updated on April 22, 2020.
2 April, 2020 | AtoZ Markets – The number of confirmed coronavirus cases in Germany has risen to 78,983, and 948 people have died from the disease. The number of cases has increased compared to the previous day. The number of confirmed cases globally has increased to 954,972, while the total number of deaths has risen to 48,354.
How is Germany Managing Coronavirus Epidemic?
German leaders have launched a powerful campaign to convince the public to adopt rules of social distancing. They also advised to isolate themselves at home and to leave their homes only for absolutely essential reasons. Restaurants, bars and shops have been closed, except for supermarkets and pharmacies. Some of the particular affected regions and cities have imposed an almost total lockdown.
Serious government warnings, along with harsh fines, put an end to this kind of behaviour. Today, most Germans remain at home and have started to collect food and toilet paper. German politicians and the public remain deeply concerned about the violation of individual freedoms and democratic rights.
Chancellor Angela Merkel asked the German people to show understanding. The current situation is the most serious crisis the German nation has faced since the end of the Second World War. Germany’s decision to close borders and restrict movement to curb the spread of coronavirus. Several thousand seasonal workers, mainly from Eastern Europe, cannot start planting and harvesting vegetables and fruits.
European Union countries should allow seasonal migrant workers who plant or harvest crops to cross borders despite national measures to contain the coronavirus, said the European Commission. EU countries have put in place border controls to stem the virus epidemic, which has also led to delays in the supply of food and medicines.
German Economy Set for Significant Recession
As in other affected countries, with the closure of most stores and businesses, the German economy is almost ground to a standstill. A considerable effort is made to prevent it from collapsing. A huge credit and subsidy program from the state has been launched for the self-employed, small employers and large companies.
The program is with an initial amount of more than 750 billion euros (the equivalent of 834 billion US dollars). Special programs have also put in place to help employees pay their rent and keep their benefits.
Kurzarbeit (translated, “short-term work”) is a German government program first used during the 2008 financial crisis. It pays about two-thirds of an employee’s salary to a company. It would have to resort to layoffs in the event of an economic slowdown. By allowing staff to stay at work (even with reduced hours and wages), Kurzarbeit benefits both employers and employees. Workers maintain a steady stream of income. Businesses avoid losing the skills these workers have acquired and which are likely to need once the economic recovery takes place.
A “short-term” system, which proved very effective during the great recession of 2008-2012, used to prevent a wave of unemployment. This system allows receiving up to 67% of their wages paid by the national employment agency. Once the crisis is over, these workers have the right to return to their old jobs with their past wages. Companies can finally get back to work quickly because they can count on an experienced workforce and do not need to seek and train new employees.
German GDP Dip by Over 5%
The Council of German Economic Advisers said that the country is practically in a state of closure. A recession will be inevitable during the first half of the year.
The board analyzed the potential economic fallout from the coronavirus pandemic based on different scenarios. Advisers expect Germany’s gross domestic product (GDP) to drop 2.8% this year if the lockdown ends soon enough. It means the economic situation could normalize during the summer. For its part, the government has only declared so far that the restrictive measures in place will in no case lift before April 20.
In the worst case, advisers said the economy could contract by as much as 5.4% this year. If a 5.4% drop in GDP seems to be a drastic decline, other researchers have been even more pessimistic. Among the institutions that paint a darker picture is the German Economic Institute (IW). It noted last week that a contraction of 10% of the economy could not exclude if the current lockdown continues until at the end of June.
Currently, almost one in five German companies say they are at risk of insolvency because of the coronavirus epidemic. Helping these needy businesses is the cornerstone of the German government’s unprecedented aid program, which lawmakers approved last week. It provides 750 billion euros ($ 831.6 billion) to help cushion the impact of the pandemic. It aims to keep businesses afloat and many employed workers in the short term. In its special report, the group of economic advisers praised the stimulus package, saying it was coming at the right time.
It called on the government to do everything in its power to stop the spread of COVID-19. Once the threat removed, policymakers well advised to support what they hoped. It would help to rapid recovery in the economy in 2021 with an expected growth of 3.7 to 4.9%.
Panel head Lars Feld said that at the moment, “working on a clearly communicated standardization strategy” would be of utmost importance. It would efforts to stabilize private households and businesses and thereby reduce the uncertainty in society in general.
Surprise Jump in German Investor Confidence Despite Virus Crisis
22 April, 2020 The confirmed coronavirus cases in Germany have risen to 148,453, and 5,086 people have died from the disease. German investors’ confidence rebounded unexpectedly in April despite the coronavirus crisis, as a critical survey showed on Tuesday. Respondents saw “the light at the end of the tunnel”. The ZEW Institute’s monthly barometer, which measures economic expectations for the coming months, jumped to 28.2 points, from -49.5 points in March. The index hit the lowest level since 2011. The April survey shattered analysts’ expectations, those polled by Factset predicting a reading of -41.3 points.
“Financial market experts are starting to see the light at the end of the very long tunnel,” said Achim Wambach, director of ZEW, in a statement. The surprising optimism comes despite a barrage of terrible warnings for the first European economy which has to face the fallout from the coronavirus pandemic. Some analysts have warned against reading the ZEW figures too broadly. “In all honesty, this figure is too good to be true,” said Carsten Brzeski, an analyst at ING Diba bank. ” ZEW index is a data point on the long road to grasp the magnitude of the COVID-19 crisis fully.”
Coronavirus Pandemic Hit Services and the Retail Sector in Germany
21 April, 2020 The number of confirmed coronavirus cases in Germany has risen to 147,062, and 4,862 people have died from the disease. Measures to contain the coronavirus pandemic hit services and the retail sector in Germany, the finance ministry said on Tuesday. The factory closings were also causing industrial production to drop. German Chancellor Angela Merkel said on Monday that she was ready to finance the economic recovery in Europe after the coronavirus pandemic. It is thanks to a larger budget from the European Union and the issuance of joint debts through the European Commission.
Neil Shearing, chief economist at Capital Economics, told, “countries will open at different times, sectors will open in different ways. The opening of car showrooms in Germany was “clearly a reflection of the importance of the automobile industry “in the country. However, he added that there is “no one-size-fits-all approach here. But, there will be commonalities, and part of these will be the opening up of the economy sector by sector”.
Germany Is Cautiously Starting to Ease Its Lockdown
20 April, 2020 The confirmed cases of coronavirus in Germany has increased to 145,184, and the total number of deaths has risen to 4,586. Germany is taking its first steps towards normality with the opening of small stores in certain regions for the first time in a month. It is after politicians declared that the coronavirus was “under control”. The majority of stores under 800 sq m will again be allowed to welcome customers.
Chancellor Angela Merkel and the premiers of regional states announced the reopening decision last week, though they were careful to see it as just a cautious first step. With the first stores opening on Monday, each of the 16 German states is ready to lift the restrictions at a slightly different rate. In some states like the capital Berlin, the reopening will take a little longer. Merkel, who has been praised for handling the coronavirus crisis, hopes to reinvigorate the struggling German economy, which officially entered recession last week.
Coronavirus Sends Germany Into Recession
17 April, 2020 The number of confirmed cases in Germany has increased to 137,698, while the total number of deaths has risen to 4,052. Germany plunged into recession in March. The lockdown caused by the coronavirus pandemic should last until the middle of the year, said the economy ministry. “The fall in global demand, the disruption of supply chains, changes in consumer behaviour and investor uncertainty” were all felt at this export giant, said the ministry.
The economic blow hit by the virus fell as Germany began to recover from 2019 by the impact of trade wars and fears of Brexit. The industry, in particular, saw an increase in new orders and activity in early 2020, the ministry noted. But “given the massive shock of demand and supply, both nationally and internationally, due to the coronavirus pandemic, economic developments have reversed course ” for the manufacturers, it said. Domestically, Germany has been in a progressive lockdown since mid-March. Chancellor Angela Merkel set to discuss the possibility of extending the restrictions beyond the current deadline of April 19. “Even if the first protective measures can be somewhat loosened (after April), growth will remain very moderate and will only resume little by little”, predicts the economy ministry.
Germany Plans to Gradually Reopen Its Economy
16 April, 2020 There were 134,753 confirmed cases of coronavirus and 3,804 deaths in Germany. Chancellor Angela Merkel exposed Germany’s plan to resume public life while maintaining social distance gradually. It is a month after the largest European economy effectively shut down in an attempt to slow the coronavirus epidemic. Some small businesses will reopen on 20 April, while schools will gradually reopen on 4 May. Most companies have close in Germany since 16 March.
The German government has extended social distancing measures until 3 May. It forces people to keep a distance of 1.5 meters and limit public gatherings to only two people, except family members. Large gatherings will ban at least until 31 August, and religious gatherings will ban until further notice. Germans also encourage to wear masks in public and to avoid travelling. The German government stated that the aim is to take small steps to revive public life. The government want to give people more freedom of movement and restore value-added chains while maintaining protective measures to prevent new chains of infection.
Germany Prepares for Gradual Lift of Restrictions
15 April, 2020 There have been more than 132,210 confirmed cases of coronavirus in Germany and 3,495 deaths. Germany is preparing to gradually lift restrictions on the COVID-19 epidemic, after experiencing a less serious situation than other European countries. The Leopoldina National Academy of Sciences has published a list of recommendations, advocating a return to normal in stages. The infection figures in Germany remain stable at a low level. Hygiene measures must maintain whatever the situation.
Chancellor Angela Merkel and the heads of the 16 regional states will speak on Wednesday based on this conclusion. They reassess the containment measures that began in mid-March and expected to last until April 19 currently. Health Minister Jens Spahn said on Sunday that containment measures would cut regionally. It now affects more than 80 million Germans. It has severe consequences for the main European economy. Shops and restaurants could also experience a return to normal, as well as administrative services. It provided that hygiene measures, in particular regular hand washing and respect for social distance.
Crisis Gives Germany Sense of Vindication for Black Zero
14 April, 2020 The number of confirmed coronavirus cases in Germany has risen to 130,072, and 3,194 people have died from the disease. Germany is deploying its financial firepower to fight the coronavirus crisis. Chancellor Angela Merkel is using Germany’s large fiscal space to help the economy and contribute to the region’s € 540 billion ($ 590 billion) rescue package. The result prompts some economists to question whether the country has done it right with its so-called “black zero” approach. It has avoided deficits for much of the past decade.
“In its budgetary approach, Germany feels completely justified,” said Holger Schmieding, chief economist at Hamburg-based Berenberg Bank. “We now have the worst hailstorm ever seen in peacetime, and we can afford to go against it – big time.” Olaf Scholz, German Minister of Finance, is convinced that the current crisis shows the wisdom of the balanced budgets pursued by him and his predecessor, Wolfgang Schaeuble.
German Lawmaker Calls for Delaying EU Climate Targets
13 April, 2020 The confirmed coronavirus cases in Germany rose to 127,854, and 3,022 people died from the disease. The effects of the COVID-19 pandemic expected to cause a deep recession in Europe and elsewhere. COVID-19 pandemic is “testing the German economy.” The EU should consider “postponing climate policy goals”, said Wolfgang Steiger, the leader of the economic council of CDU.
Steiger said the fallout from the pandemic on the economy could amount to further “deindustrialization” in Germany. Experts predict a global recession as a result of business closures and subsequent layoffs. Germany has offered financial assistance to many businesses and people affected by closures and social distancing. Chancellor Angela Merkel’s government pledged 750 billion euros in emergency aid in March to support the economy. Small businesses and the self-employed can benefit from direct grants of up to € 15,000. Large businesses can stabilize with larger capital funds.
German Economy Is Collapsing Due to the Pandemic
10 April, 2020 In total, Germany has had more than 113,000 confirmed cases of the disease, and 2,349 deaths. According to the country’s research institutes, the German economy expected to shrink by 10% in the three months before June. Leading German economic companies said that the German economy expected to shrink 4.2% in 2020 due to the coronavirus. The country’s GDP expected to drop 1.9% in the first quarter of the year and 9.8% in the second quarter, according to business forecasts.
The German research organization (DIW Berlin), the Halle Economic Research Institute (IWH), the Ifo Institute (Munich), the Kiel Institute (IfW Kiel) and RWI (Essen) made the joint economic forecast. The organizations said that “the German economy is collapsing dramatically due to the coronavirus pandemic”. They added that the sharp drop in the second quarter would be twice as large as that in the first quarter of 2009.
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