German companies hard hit by measures to contain the novel coronavirus pandemic are to receive a major boost to their finances, government sources told dpa following an online meeting between Chancellor Angela Merkel and regional leaders.
The funding will total up to 10 billion euros (11.8 billion dollars) and follows a call from Finance Minister Olaf Scholz for compensation for revenue lost due to closures imposed by a new set of measures set to go into force for the month of November.
Companies with up to 50 staff members, as well as the self-employed, would receive 75 per cent of lost turnover under the plan.
Larger companies will be subject to EU rules for assistance, which will differ from company to company, based on the turnover in the same month last year.
According to a report in the business daily Handelsblatt, the money will come from an existing bridging fund of 25 billion euros, from which just 2 billion euros have been drawn to date.
The fund will be extended to the middle of next year. It had previously been set to close at the end of this year.
Conditions for the hard-hit cultural and events sectors are also to be eased.
The new shutdown for November will hit restaurants, bars, hotels, sports facilities, cosmetic studios and other businesses.
Economists have warned that a second, even bigger wave of coronavirus infections is threatening to put the brakes on Germany’s economic recovery.
The German Institute for Economic Research (DIW) said that the economic outlook was set to cloud over, following a strong third quarter rebound forecast at around 6 per cent.
“The rebound will very probably be significantly slowed down,” said Claus Michelsen, the DIW’s head of economic forecasting.
“The return of tougher restrictions on public and economic life is looming, the pandemic’s development is stripping consumers and businesses of their optimism,” he said.
Any closures would be a severe blow to businesses already weakened by similar sweeping measures earlier this year. Some of them “hardly have financial reserves left,” Michelsen said.
The DIW currently expects German economic output to grow slightly towards the end of the year, but a strong recovery is not expected.
Germany’s Federal Statistical Office (Destatis) is scheduled to release third quarter gross domestic product data on Friday.
Joerg Kraemer, chief economist at Commerzbank, warned that the November shutdown could halt Germany’s hard-won economic growth in the fourth quarter.
“The economy cannot be switched on and off like a light bulb without damage being done,” he said
While manufacturing and trade may not be directly affected by the proposed closures, Kraemer argued that these industries would suffer nonetheless due to the general uncertainty as well as increasingly tough measures abroad.
Various industry associations spoke out against the government’s planned closures.
Ahead of the decision, the Federation of German Wholesale, Foreign Trade and Services (BGA) criticized restaurant closures as a possible death knell.
BGA president Anton Boerner said the move would be “completely disproportionate,” arguing that the problem was down to people spreading the virus at private gatherings and not in restaurants where hygiene measures are in place.
Germany’s SPIO film industry organization made a similar argument regarding cinema closures.
“Restrictions like these risk damaging acceptance and therefore also the efficacy of important coronavirus protective measures,” it said in a statement.
The German Tourism Association (DTV) added to calls for additional state aid in the event of a temporary shutdown.
“Even companies that had hoped to get through the crisis well with higher reserves are now reaching their limits,” DTV managing director Norbert Kunz said.