Coronavirus: How can workers and businesses benefit from Germany’s new rescue package?

Coronavirus: How can workers and businesses benefit from Germany's new rescue package?
Photo: DPA
After a decade as Europe's leading disciple of fiscal virtue, Germany is unleashing a flood of government cash to counter the devastating economic impact of the novel coronavirus.

Here are the most important steps ministers have asked parliament to approve by the end of this week.

READ ALSO: Germany agrees on economic package worth hundreds of billions in coronavirus fight

What will happen in the social welfare sector?

Eviction due to not paying the rent will be prohibited between April 1st to September 30th, and there will be need to prove this, states the draft legislation.

In the case of Hartz IV welfare applications, the property audit and the examination of the amount of the rent paid for the apartment are to be suspended for six months.

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READ ALSO: German government promises relief for renters amid coronavirus crisis

Expanded regulations on reduced working hours will also make it easier for companies to keep employees instead of sending them into unemployment.

The government also plans to grant an additional 1.2 million people basic income support.

Meanwhile, people in Germany who lose their jobs altogether because of the crisis will not face means-testing for unemployment benefits until the end of June.

For families with income shortfalls, the government plans to ensure easier access to the child supplement: Instead of checking the income of the last six months, only the income of the last month will be examined. Parents with declining incomes due to needing to tend to their children will also receive help.

What is planned for small businesses?

Direct financial injections: Germany says it will offer €50 billion of support for small and one-man-band companies, like photographers, musicians or carers.

Depending on the number of employees, individual companies will receive up to €15,000 each to keep the lights on.

Meanwhile freelancers applying for unemployment benefit will not be forced to seek new work.

READ ALSO: Germany plans €40 billion rescue package for freelancers and small businesses

What should medium sized and larger companies get?

For medium-sized companies, an unlimited credit programme is to be made available through the state development bank KfW. 

The federal government wants to give them warranties worth billions and take over debts. When the crisis is over, they are to be privatised again. Companies in Germany will additionally be able to pay their taxes later.

Top-ups for workers

Berlin has eased access to a programme that tops up workers' pay with government cash when their hours are slashed.

The scheme is widely credited with saving large numbers of jobs during the financial crisis of 2008-9.

Germany expects more than two million people to work shorter hours in the coronavirus crisis, far outstripping the peak seen over a decade ago.

At over €10 billion, the massive estimated costs are nevertheless well below the BA's cash reserves of €26 billion.

Backstop for big business

Germany wants to make sure bigger businesses can throw open their doors again once the danger has passed.

The country must avoid a “fire sale” of its economic crown jewels, economy minister Peter Altmaier has said.

Germany will create a €600 billion “economic stabilisation fund” offering €400 billion of guarantees for companies' debts, €100 billion to lend directly to or buy stakes in troubled firms, and €100 billion to fund state investment bank KfW.

To keep their liquidity flowing, companies will also be able to delay tax payments.

First in the queue for actual cash injections – rather than guarantees – could be the suffering tourism and services industries.

Airline group Lufthansa has cancelled around 90 percent of flights in the coming weeks, while tour operator TUI has already applied for state aid.

End to debt taboo

To beef up its financial firepower and compensate for falling tax revenue as the economy shrinks, the government plans to borrow around €156 billion this year.

“We will fight with all our might against this crisis calling into question healthcare for our citizens or economic activity in this country,” Finance Minister Olaf Scholz said.

As well as upending a years-long “black zero” no-new-debts policy, the new borrowing will blast through a deficit limit inscribed into the constitution in 2009.

Ending the crisis “comes first”, Chancellor Angela Merkel has said, adding “we will see at the end of that where our budget stands”.

Cash for hospitals

Health Minister Jens Spahn said Monday that his department would have an additional €10 billion this year to boost the health system.

Hospitals will get financial help to add beds and buy equipment like respirators, with Berlin aiming to double intensive care capacity from the 25,000 beds presently available.

And pay for doctors, nurses and students and retired medical professionals enlisted into the battle against the virus will be increased.

READ ALSO: Germany ramps up intensive care and hospital capacity in coronavirus fight


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