Germany braces for ‘worst recession’ in post-war history

The German economy will suffer the biggest slump in its history this year over the coronavirus crisis, the government warned Wednesday, pushing Europe's top economy into a painful recession.

Germany braces for 'worst recession' in post-war history
Peter Altmeier speaks at a press conference in Berlin on April 17th. Photo: DPA

German gross domestic product (GDP) is expected to shrink by a record 6.3 percent as demand for exports plummets and lockdown restrictions weigh on domestic consumption, Economy Minister Peter Altmaier said in Berlin.

“We will experience the worst recession in the history of the federal republic” founded in 1949, Altmaier said.

“The effects of the coronavirus pandemic will push our economy into a recession after 10 years of growth.”

READ ALSO: Coronavirus: German recession to last until mid-2020

This year's forecast drop in GDP is worse than during the global financial crisis in 2009, when Germany's economy contracted by more than five percent.

If the government's projection is confirmed, 2020 will mark the biggest contraction since federal statistics authority Destatis began keeping records in 1970.

The government offered a glimmer of hope however, predicting that the economy would bounce back in 2021 and grow by 5.2 percent as the virus impact wanes and businesses reopen.

Altmaier pointed out that the global economy as a whole is expect to tip into recession as the world battles the coronavirus fallout, with the International Monetary Fund predicting a worldwide contraction of 2.8 percent in 2020.

Export champion Germany in particular will feel the pain from disruptions to supply chains and lower demand for made-in-Germany goods from abroad, he said.

Exports are expected to plunge by 11.6 percent in 2020, according to the economy ministry.

Job fears and coronavirus restrictions that have kept shops and entertainment venues closed are set to weigh heavily on demand at home too, dealing a blow to the key growth driver of domestic consumption.

A sign reading “We're closed due to coronavirus” hangs outside of a hair salon on April 16th. Photo: DPA

International demand and supply shocks will also sap appetite for producer goods in Germany, Altmaier said.

Overall, Germany's imports are slated to fall by just over eight percent this year — slightly narrowing the nation's famously massive trade surplus as exports fall faster.

'Endurance test'

The worst of the virus impact will hit Germany in the second quarter, Altmaier said, before a rebound is expected to get under way.

Economic institutes recently forecast that Germany's GDP would shrink by nearly 10 percent between April and June, in what would be a historic low.

The dire outlook is set to leave its mark on the country's employment levels.

Germany has long enjoyed record-low unemployment at around five percent, but this is expected to climb to 5.8 percent this year.

To help cushion the blow for companies and workers, the German government has unveiled a massive rescue package worth over one trillion euros.

It includes state-backed loan guarantees, direct cash injections and schemes to put workers on reduced hours to avoid layoffs.

Around three million workers have already been placed on the short-time work scheme, Altmaier said, which sees the government top up salaries and is known as “Kurzarbeit” in German.

Several big-name firms such as sportswear maker Adidas, Condor airline and travel firm TUI have already received hundreds of millions of euros in government-backed loans, while Lufthansa is still negotiating a potential bailout.

Car giants Volkswagen and Daimler have also restarted some assembly lines.

READ ALSO: Bundestag approves history coronavirus rescue package

Altmaier said the economy would gather steam as the coronavirus restrictions are gradually lifted, with Germany taking the first cautious already by reopening some shops and schools.

But Altmaier warned against acting too hastily.

“We can't risk a second wave of infections,” he said, adding that he was in favour of a step-by-step approach “if the (infection) numbers support it”.

“This is a test of endurance,” he said. “We can't put the success we've achieved at risk.”


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EXPLAINED: The new rules around getting a sick note over the phone in Germany

Due to high Covid infection numbers throughout the summer, it’s now possible to get a sick note from a doctor over the phone again for some illnesses. Here’s what you need to know.

EXPLAINED: The new rules around getting a sick note over the phone in Germany

What’s happened?

In spring 2020, German authorities changed the law so that people with a mild upper respiratory tract illness, such as the common cold, were able to get an incapacity to work certificate or AU-Bescheinigung by simply calling and speaking to their GP.

The rule was extended several times and finally reversed on June 1st this year due to falling infection figures. Since then people have had to go back to the practice – or do a video call if the doctor’s office has that system in place – to get a sick note.

Now, due to a decision by the Joint Federal Committee, the regulation has been reintroduced and patients can call their GP again for a sick note.

Can I get a sick note over the phone for any illness?

No. As before, the regulation only applies to patients suffering from a mild upper respiratory tract illness. Though Covid has not explicitly been named in the announcement, it seems that it is intended to be covered by the regulation.

If the doctor is convinced that the patient is unfit for work after a telephone consultation, then they can issue a sick note for up to seven days.

READ ALSO: EXPLAINED: The changes around doctor’s notes in Germany you should know

If the symptoms persist after seven days, the certificate can be extended once more for another week.

Why now?

According to the Chairman of the G-BA, Josef Hecken, the regulation has been introduced now as a response to rising Covid numbers and in anticipation of the cold and flu season in the coming months: “We want to avoid full waiting rooms in doctors’ offices and the emergence of new infection chains,” he said.

The telephone sick leave rule is a simple, proven and uniform nationwide solution for that, he said. The rule is also necessary because video consultation hours are not yet available everywhere.

What else should I know?

The health insurer DAK is calling for telephone sick leave in the case of light respiratory diseases to be made possible on a permanent basis in Germany. DAK’s CEO Andreas Storm said that this should “not always be up for debate, because it has proven itself.” 

READ ALSO: Everything you need to know about making a doctor’s appointment in Germany

The social association VdK also welcomed the reintroduction of the rule. The VdK’s President Verena Bentele said that the regulation would help to protect high-risk groups in particular from potential infections.

What are the rules to know about sick notes in Germany?

Germany has a strict system in place. If you are sick, you need to give your employer a Krankmeldung (notification of sickness) before the start of work on the first day (of your illness).

However, you also need to hand in a Krankschreibung (doctor’s note) on the fourth day of your illness. Some employments contracts, however, require you to submit a sick not earlier than the fourth day so check with your boss or HR on that point.