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Germany sees record GDP decline amid coronavirus spending

Germany, long adverse to being in the red, on Tuesday posted a public deficit of €51.6 billion for the first half of 2020, with coronavirus lockdowns undercutting government revenue as it increased spending.

Germany sees record GDP decline amid coronavirus spending
Photo: DPA

The economy posted a deficit of 3.2 percent of Gross Domestic Product in the six months to June, according to Germany's statistics agency Destatis, above the 3.0 percent limit under EU rules that Brussels suspended due to the pandemic.

In the same period of 2019, Germany recorded a public surplus of 2.7 percent of GDP, or around €46.5 billion.

READ ALSO: Germany debates how to spend massive budget surplus

Destatis revised upwards the GDP estimate for the three months to the end of June to show a contraction of 9.7 percent, better than the initially reported 10.1 percent slump.

It is still “the sharpest decline since quarterly GDP calculations for Germany began in 1970,” the agency said, worse than at the height of the financial crash, when GDP fell 4.7 percent in the first quarter of 2009.

For the first time since 2010, state revenue was down year-on-year, Destatis said, while government spending soared 9.3 percent as it tried to support the economy.

Last week, Finance Minister Olaf Scholz said that Germany will take on yet more debt in 2021 to lessen the impact of the pandemic, forcing it to suspend its cherished policy of keeping a balanced budget.

Scholz previously said Germany planned to borrow around €218 billion in 2020 to help pay for a huge rescue package to steer the country through the coronavirus-induced downturn.

READ ALSO: Germany finance minister sees 'no way back' from EU joint debt

'Road to recovery'

The German economy is expected to see a sharp recovery in the third quarter of 2020 however, after the relaxation of pandemic restrictions allowed economic activity and public life to resume.

A key survey separately found that business morale improved again in August for the fourth consecutive month.

The Ifo institute said its monthly barometer rose to 92.6 points, from 90.4 points in July.

“The German economy is on the road to recovery,” Ifo President Clemens Fuest said.

The index had plummeted to a record low in April when Germany's coronavirus restrictions closed factories, restaurants and shops, before starting a rebound the following month as the economy gradually reopened.

“Today's Ifo index keeps the hopes for a V-shaped rebound alive,” ING Economist Carsten Brzeski said. “However, the fact that a rebound is not necessarily the same as a recovery will be the main theme of the coming months.

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COVID-19

Munich sees sharp rise in Covid cases after Oktoberfest

Since the start of Germany’s Oktoberfest, the incidence of Covid infections in Munich has risen sharply. Though a connection with the festival can’t yet be proven, it seems likely.

Munich sees sharp rise in Covid cases after Oktoberfest

Two weeks after the start of Oktoberfest, the Covid numbers in Munich have more than tripled.

On Sunday, the Robert Koch Institute (RKI) reported an incidence of 768.7 for the city of Munich, though updated figures for the end of the festival are not expected until later in the week. Usually, on weekends and public holidays, there is a delay in reports.

In the entire state of Bavaria, the incidence value on Sunday was 692.5.

According to Munich’s public health officer, Beatrix Zurek, bed occupancy in Munich hospitals has also increased. Two weeks ago, 200 beds in Munich were occupied by Covid patients, whereas there are now around 350.

Though a relationship between the sharp rise in infections with Oktoberfest, which ended on Monday, can’t be proven at the moment, it seems very likely, according to experts. A significant increase in Covid incidences has also been shown at other public festivals – about one and a half weeks after the start. 

READ ALSO: Germany’s famed Oktoberfest opens after two-year pandemic hiatus

After a two-year break due to the pandemic, around 5.7 million visitors came to this year’s Wiesn according to the festival management – around 600,000 fewer than at the last Oktoberfest before the pandemic in 2019, when there were 6.3 million.

Federal Health Minister Karl Lauterbach (SPD) took to Twitter to comment on the rise in incidence in Munich during the Oktoberfest. “This would not have been necessary if self-tests had been taken before admission,” he said.

“Compared to the price of a measure of beer, €2-3 (for tests) wouldn’t have mattered,” he said.

Even before the start of the Wiesn, he had spoken out in favour of people taking voluntary self-tests. Lauterbach stressed that now is the time for special measures against Covid.

“The development shows what will happen if the states wait too long with the mask obligation in indoor areas,” he added.

READ ALSO: KEY POINTS: Germany’s new Covid-19 rules from October

In neighbouring counties, where many Oktoberfest visitors came from, the number of Covid cases has also risen noticeably.  Beatrix Zurek said that it is unclear, however, how much of a role Oktoberfest played in these figures, as people are currently much more active socially overall, with concerts and other events also taking place throughout the state.

Christoph Spinner, an infections specialist at Munich’s Klinikum, has urged people not to be alarmed by the rising numbers.

“We had expected rising incidences here. We knew that there could be a doubling, tripling, even quadrupling,” he said.

He said that this is no cause for concern, as many people have been vaccinated or have also recovered from previous Covid infections, so any new infections are therefore usually mild.

The virologist advises people over 60 or with pre-existing conditions to get a second booster vaccination, but otherwise said people shouldn’t be alarmed by the rising incidences.

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