Corona economic stimulus program: waiting for the right oomph

Martin Polansky
ARD capital studio

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The program followed the so-called bazooka. With it, the economy should be brought through the first lockdown from March 2020. For example through emergency aid or the extended short-time work allowance.

And with the “boom” from June 2020, the economy should take off again. Through public investments, for example in e-mobility, through the bridging aid for small companies or a € 300 child bonus. In total, there were more than 50 measures. The heart of the “boom” was the temporary reduction in VAT from 19 to 16 percent.

Scholz is satisfied

Now, a year later, SPD finance minister Scholz is facing him ARD capital studio satisfied: “We brought about a bang in Germany with a lot of resources that we used.” And if you look at the economic data now, everything went better than had been feared. Scholz emphasizes that the aid saved many jobs and companies.

The Federal Employment Agency is currently talking about 450,000 more unemployed due to the Corona crisis. Germany is doing very well, says the head of the Kiel Institute for the World Economy, Gabriel Felbermayr. He has limited praise: “All in all, you have to give the government a good certificate,” says the economic researcher. You have pursued a stabilization policy. However: “But the oomph that was announced a year ago would not only have wanted to stabilize, but also to push. And that has largely failed.”

Consumption hardly boosted

In the meantime, there have been some studies on lowering VAT A study commissioned by the Federal Ministry of Justice and Consumer Protection found that the price reductions were actually passed on to consumers in many cases in the second half of last year.

However, this hardly really boosted consumption. This is the result of studies by the Munich Ifo Institute and the union-related Hans Böckler Foundation. The calculation: The reduction cost 20 billion euros in tax losses, six to seven billion euros in additional consumption, according to the economic researchers.

Consumption slumped after lockdown

The Kiel institute director Felbermayr refers to the development of the infection after last summer: “The problem was that you were surprised by the second wave.” That started from November and pushed back consumption properly, the economic researcher sums up ARD capital studio. Because: It was difficult to spend money with closed shops and restaurants. The German Business Institute, which is close to the employer, points out that every fourth household has used the reduction in VAT to bring purchases forward.

From the perspective of the Chancellor candidate of the Green Annalena Baerbock, those who have bought a large car have benefited in particular. And the FDP financial expert Otto Fricke points out that prices have also risen since the value added tax was raised again this year. Currently, inflation in Germany is 2.5 percent and thus above the value in the euro zone.

Ten years to get out of the crisis?

For the state, the various corona programs have led to significantly higher debts. The total debt is likely to rise from around 60 percent of gross domestic product before Corona to around 75 percent, according to the Federal Ministry of Finance. Because of the stabilization measures, but also because of the economic stimulus program. Interest rates are currently low. But the debt brake stipulates that the state will have to largely repay the additional loans over the next 20 years.

Finance Minister Scholz is banking on economic growth: “We will grow out of this crisis again after 2022. That will probably take about ten years.” According to the finance minister, growth can help combat the crisis and also bear the economic and financial burdens that come with it.

Conclusion after a year of economic stimulus program: It has helped to prevent the total collapse of the economy. But the right “oomph” to get started again has yet to come.