For the first time since 2013, the cantor of budgetary orthodoxy plans to contract debts this year, amounting to 156 billion euros.
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Times are no longer under tight budgetary conditions in Germany: the government adopted an unprecedented bailout of hundreds of billions of euros on Monday to protect its economy from the impact of the coronavirus.
Here are the main measures envisaged, which have yet to be approved by parliament this week:
Hundreds of billions
The program includes three essential elements: an extension of the federal budget by around 100 billion euros for this year, the creation of an emergency fund for large companies and their employees with the possibility of partial nationalization, endowed with up to 600 billion euros, and a capacity for the State to guarantee bank loans to companies in difficulty increased from 357 billion euros to 822 billion euros in total.
However, according to the government, these figures cannot simply be added up because some of the funding overlaps with each other.
The end of a taboo
For the first time since 2013, Germany, champion of budgetary orthodoxy, plans to contract debts this year, amounting to some 156 billion euros. Both to finance support measures and compensate for a decline in tax revenue.
The so-called zero deficit budget balance policy, often criticized by Germany’s partners who accuse it of slowing growth with its rigor, shatters.
These loans also force the first European economy to put on hold the constitutional rule of the “debt brake” which has dictated its conduct for years. Established in 2011, it in principle only allows a deficit of up to 0.35% of GDP.
This threshold can nevertheless be exceeded in exceptional circumstances, which Berlin invokes with the coronavirus.
Partial nationalizations
The bulk of the envelope announced Monday aims to ensure the survival of large companies in the country, very exporting and therefore particularly weakened by the crisis.
It is also about preventing them from falling into the clutches of foreign investors. Economy Minister Peter Altmaier has warned of “serial sales” of national gems.
The government is thus setting up a relief fund of up to 600 billion euros, through which the state, via its public bank KfW, can guarantee the credits of these companies and, for those who risk bankruptcy, buy shares in their capital.
The state did the same in the banking sector with Commerzbank during the 2008/2009 financial crisis. The tourism, business services and transport sectors could be the first to benefit.
One of the potential candidates for semi-nationalization is the airline Lufthansa, most of whose planes are now grounded.
SMEs, employees, hospitals
The government wants to spend a package of 50 billion euros in direct aid for SMEs or the self-employed such as photographers, artists or physiotherapists unable to exercise their profession due to containment measures.
They will receive individual aid of 9,000 to 15,000 euros for three months. One condition: they will have to prove that their cash flow problem is linked to the crisis.
Some German regions will also allow their companies to defer paying their taxes.
Berlin will also finance a whole series of social measures, such as a deferral of rent payments or an easing of the use of short-time working which should affect more than 2 million people, according to the latest projections, far more than 1, 4 million during the 2008/09 crisis.
Finally, the state will allocate an additional 10 billion euros this year to the health system. This will include helping hospitals to equip themselves with new respiratory support beds.
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