The German government adopted measures of hundreds of billions of euros, unheard of since the Second World War, on Monday to fight the recession expected due to the economic impact of the coronavirus.
This package provides massive aid to businesses and employees, including the possibility for the state to partially nationalize groups deemed strategic who are threatened with bankruptcy.
“We are going to do everything necessary to defend businesses and jobs,” said Finance Minister Olaf Scholz at a press conference. Chancellor Angela Merkel is in quarantine for having been in contact with an infected doctor.
Germany therefore suspends all the budgetary constraints it has set itself in recent years and which have made it one of the most orthodox countries in Europe in terms of public accounts.
The first time that Germany borrows since 2013
The federal government will contract debts amounting to 156 billion euros, according to the text of the law adopted in the Council of Ministers and which is yet to be approved by Parliament this week.
It is the first time that the State has borrowed since 2013. In the meantime, it has recorded only budget surpluses.
The leading European economy, often criticized by its partners and international institutions for its budgetary rigor, thus suspends its restrictions on public deficits enshrined in the constitution, the famous rule of the “brake on debt”. The latter in principle only authorizes a deficit of up to 0.35% of GDP, but can be relaxed in exceptional circumstances.
German companies, which export a lot, are particularly affected by the restrictions put in place in many countries to stem the spread of the pandemic.
The aid package provides a capacity of loans guaranteed by the State to the tune of 822 billion euros in total, to help companies to solve their cash flow difficulties and to strengthen their capital. This envelope will help finance a relief fund for large companies with up to 600 billion euros: the state will be able to buy shares in those who vacillate against the virus, as it had done in the banking sector. with Commerzbank during the 2008/2009 financial crisis.
France has adopted a plan providing in particular for a deferral of charges in the amount of 35 billion euros and a state guarantee for bank loans granted to companies to the tune of 300 billion.
Easing the use of technical unemployment
The German program also provides for a whole series of measures to help employees, in particular a relaxation of the use of technical unemployment, aid to SMEs, self-employed workers and even to tenants.
“We will fight with all our strength against this crisis affecting health care for our fellow citizens or economic activity in this country”, Olaf Scholz.
The shock looks tough for the largest European economy. The government expects a recession of “at least” 5% this year, recognized the Minister of Economy, Peter Altmaier, at the press conference. Before the crisis, the government was still betting on a 1.1% increase in Gross Domestic Product in 2020.
According to him, the decline in economic activity this year will be “at least as high as in 2008-2009” during the financial crisis, when the GDP contracted by 5%.
VIDEO. Coronavirus: in Mulhouse, the army deploys its field hospital