The Impact of the COVID-19 Outbreak in Germany
By Sebastian Hass, Partner
March 31, 2020 (Last update: April 4, 2020)
About the general situation in Germany
Although COVID-19 has a huge impact on the German society in general, compared to other European countries, Germany is not dealing with the same exceptional hardship. Worldwide, we have the lowest death and infection rate per inhabitants. Since almost two weeks, we are facing a countrywide shutdown of businesses and social activities, i.e. nonessential shops and services have been ordered to shut. Restaurants and cafes can only offer food delivery or take away. These measures are expected to remain in place until April 20. Schools, universities and kindergartens across the country will remain closed until the Easter holidays end on April 24. Also, the German states have banned gatherings of more than two people and imposed stricter social distancing rules. Germans are still allowed to go to work and exercise outside, provided they maintain at least a 2-meter distance from others.
The economic situation
Chancellor Angela Merkel called the COVID-19 outbreak, the “biggest challenge the Germans have to face since World War 2”. The German “Mittelstand”, the backbone of the German economy, is suffering. Travel bans and a lack of personal communication led us to an economic crisis. However, to face the economic impact the Bundesregierung and German parliament acted fast. On Wednesday the 25th of March, Peter Altmaier, Minister for Economic Affairs, said the following during his speech in parliament:
“The German Bundestag today demonstrated again how quickly it can adopt important legislation when this is urgently needed. It is now important to secure the economic survival especially of own-account workers and microenterprises and to do everything we can to help our companies to cope with the crisis as well as possible. We need to safeguard the economic substance of our country. It is now important to act together - and quickly!”
On that day, the German parliament passed a bill to support the German economy with an unseen amount of more than € 750 Billion (updated amount € 1.1 Trillion). Small and Medium sized companies can apply for a cash flow subsidy up to 25.000 € immediately. In addition to immediate assistance for small enterprises, there are comprehensive loan programmes for companies to apply for given out by the German KFW Bank. This Bank is financing enterprises in Germany since the second world war with low interest rates and is taking over a huge number of guarantees. In addition, the Kurzarbeit (short-term-labour) - scheme, a wage subsidy, will help to stabilize the country’s labor market.
The road to recovery
Besides the containment of the pandemic itself, the vital question right now is how we can return to “normal” life, business, and how to reduce the economic damage resulting from the crisis. Our government at least says they will do everything to protect the economic structure and prevent the sale or break-up of important German companies. They already have proven their willingness by passing the bills mentioned.
We have a strong, diverse, recession proofed economy, skilled workforce, great infrastructure and now the support from the German government. The Corona Pandemic might affect the private industry for a few months, but we hopefully will recover soon and use our strength which made Germany Europe’s economic powerhouse.