- German Chancellor Angela Merkel conducted her cabinet meeting via video conference.
- "That’s a very big package with a lot of measures," said Finance Minister Olaf Scholz, "and we can hang on for a long time."
- “We will scale these interventions in such a way that we intervene as little as possible in markets, and maintain private initiatives as far as possible.”
The German government has announced it will take out new loans as part of an unprecedented package of measures, totaling €750 billion ($800 billion), adopted to cushion the adverse effects of coronavirus pandemic (COVID-19). German Chancellor Angela Merkel’s cabinet signed the spending plan at an emergency meeting Monday, a Berlin government spokesman announced.
The German leader led the meeting through a video conference. Chancellor Angela Merkel went into self-quarantine after learning that her doctor, who had vaccinated her against pneumonia on Friday, tested positive for COVID-19. Merkel, 65, will continue to work from home and be tested repeatedly over the next few days, her spokesman said Sunday.
After the economic implications of the crisis became clear, the German Executive decided to significantly increase spending and renounce the “Black Zero” policy, which has been the German government’s policy for a decade. The term refers to a balanced budget without any new government borrowing— a political stance that has been championed by Merkel’s center-right Christian Democrats (CDU), and enforced in the German Constitution itself since 2011.
According to a Ministry of Finance estimate, Germany’s economy would shrink by at least 5% this year. “That’s a very big package with a lot of measures,” said Finance Minister Olaf Scholz, “and we can hang on for a long time.” He added, “now we’re benefitting from years of solid budgetary policies. With a debt ratio down to 60 per cent of economic performance we can throw our entire collective power into the ring.”
Scholz was adressing a joint press-conference with Economy Minister Peter Altmaier. He added that Germany will double the number of beds in intensive care units. As per the new “Kurzarbeit”— or “short time”— rules, people who have no other option but to stay at home with children under 13, because of school closures, will be entitled to 67% of their lost income. This will go on initially for six weeks, to a maximum of €2,016 a month.
Germany’s additional €156 billion budget, which will be financed through new loans, shows the Berlin authorities’ determination to use “all available means” to combat the effects of the epidemic, Scholz added. Germany will borrow the money this year to finance measures to limit the impact of the epidemic. A bail-out fund set up to acquire corporate stakes and finance business loans could make debts of up to €200 billion, if needed.
The final figure on the amount made available to the fund depends on how many companies will request government support, said Deputy Finance Minister Jörg Kukies. Also, on Monday, the government initiated the mechanism by which the companies facing difficulties can receive loans of approximately €500 billion through the German state bank KfW.
In addition, the stability fund will provide loan guarantees of €400 billion to prevent companies from being able to pay off their outstanding debts, so that the total support measures reach €750 billion. Federal economics minister Peter Altmaier said Berlin would use such measures “very carefully.”
“We will scale these interventions in such a way that we intervene as little as possible in markets, and maintain private initiatives as far as possible.”