THE government of German Chancellor Angela Merkel has taken its first steps to help companies and workers affected by the fallout from the coronavirus outbreak and will invest an additional 12.4 billion euros (US$14.1 billion) between 2021 and 2024.
After more than seven hours of talks Sunday night, Merkel’s coalition loosened rules for short-term work compensation, making it easier for big companies heavily affected by the virus like Deutsche Lufthansa AG to apply for aid to offset wages when they are forced to temporarily halt work. “No company in Germany should go bankrupt and no job should get lost due to the coronavirus,” the coalition said in a statement after the meeting.
Pressure for Germany to act intensified in the days before leaders of Merkel’s Christian Democratic-led bloc and the Social Democrats met in the chancellery in Berlin.
While short of the full-blown stimulus package that many economists and investors urged, Germany’s government sought to walk a fine line between reassuring business and avoiding public panic.
Merkel’s coalition could not agree on other measures like an accelerated phase out of the so-called solidarity tax, which helped pay for reunification, or an expansion of funds for state-backed loans and guarantees to ease a cash crunch for companies affected by supply and demand disruptions.
The clearest sign that the virus was hitting the German economy came Friday, when Deutsche Lufthansa AG slashed capacity by as much as 50 percent.
“The impact on our booking situation is immense,” chief executive officer Carsten Spohr said in an internal memo to employees. “We must assume that it may take months before we will see first signs of stability,” he said in the Friday message.
German companies cut spending for a third quarter at the end of 2019, leaving the economy vulnerable to supply chain havoc caused by the outbreak. Gross domestic product stagnated in the fourth quarter, slowing the annualized pace of growth to 0.3 percent.