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‘We’ll be struggling well into next year’: German borrowing to soar amid pandemic

Germany on Friday passed a 2021 budget that once again smashes its "debt brake" rule, promising to shield businesses and workers from the economic hit of the pandemic as cases continue to rise.

'We'll be struggling well into next year': German borrowing to soar amid pandemic
The seating area of a restaurant closed off in Boltenhagen on the Baltic Sea coast. Photo: DPA

Chancellor Angela Merkel's government plans to borrow €300 billion ($364 billion) across 2020 and 2021 combined after the government pledged more than a trillion euros in aid, including through short-time work schemes (Kurzarbeit) and business support.

“The budget is the basis for everyone to be confident that we can provide the necessary economic and social support to get us through this crisis together,” Finance Minister Olaf Scholz told lawmakers.

The budget for 2021, which passed with 361 votes in favour to 258 against, provides for a total of €179.8 billion in new loans and nearly €500 billion in public spending.

It means for both 2020 and 2021, Germany will abandon its cherished “debt brake”, a constitutionally enshrined rule that forbids the government from borrowing more than 0.35 percent of gross domestic product (GDP), before planning to return to no new debt in 2022.

Restrictions to curb the second wave of Covid-19 – including shutting the food-and-drink, leisure and cultural sectors – continue to burden the economy, which previously pushed Berlin to amplify its aid to businesses.

Yet case rates continue to climb. On Friday, Germany reported a record nearly 30,000 new infections and almost 600 deaths in a 24-hour period.

Now, Merkel is facing calls to tighten restrictions again.

READ ALSO: Germany mulls three-week lockdown from December 20th

Aid can't be 'endless'

Despite the “ray of hope” of a vaccine rollout, Scholz said, “we know that… we're going to be struggling well into next year with the health, economic and social challenges that are going to follow from this pandemic.”

Businesses hit by the current closures are entitled to claim aid amounting to up to 75 percent of their revenues for November and December 2019, expected to cost the government some 30 billion euros.

However Economy Minister Peter Altmaier said last week that support for pandemic-hit firms implemented through November and December could not go on “endlessly”.

Nevertheless Altmaier on Friday said he aimed to increase the ceiling for aid from January in the case of a harder lockdown.

Germany's debt-to-GDP ratio will climb to 70 percent this year, Germany's central bank said in a report published Friday.

But public finances will likely improve as coronavirus measures come to an end, it said.

The government expects the economy to shrink by 5.5 percent this year, before rebounding by 4.4 percent next year.
 

Member comments

  1. If these lockdowns continue, no amount of money will keep business and people in Germany and the rest of the world from going bankrupt.

  2. We are very close to getting to a point where the cure becomes worse than the disease.

    The vaccines are imminent, so these must be the final lockdowns, or the economic pain over the next decade will outweigh any pain we’ve spared ourselves in illnesses avoided.

  3. We are very close to getting to a point where the cure becomes worse than the disease.

    The vaccines are imminent, so these must be the final lockdowns, or the economic pain over the next decade will outweigh any pain we’ve spared ourselves in illnesses avoided.

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TRAVEL NEWS

Travel in Europe: UK to scrap all Covid travel rules

The UK is set to scrap all Covid-19 travel restrictions in what the government described as a "landmark moment".

Travel in Europe: UK to scrap all Covid travel rules

Testing is no longer required for vaccinated travellers, but the UK government has announced that it will scrap all Covid-19 travel rules on Friday, March 18th.

“As one of the first major economies to remove all its remaining Covid-19 travel restrictions, this is a landmark moment for passengers and the travel and aviation sector,” said the Government in a press release. 

From 4am on March 18th:

  • Passengers going to the UK will no longer be required to fill out a Passenger Locator Form before travel;
  • Passengers who are not vaccinated will not be required to take a pre-departure Covid test, or a Day 2 test following arrival. Fully vaccinated travellers are already exempt from having to do this;
  • Hotel quarantine for travellers coming from ‘red list’ countries, of which there are currently none, will also be scrapped by the end of the month. 

“We will continue monitoring and tracking potential new variants, and keep a reserve of measures which can be rapidly deployed if needed to keep us safe,” said UK Health Minister Sajid Javid. 

The UK has lifted all Covid-related rules including mask rules and mandatory self-isolation if you test positive for Covid.

Some European countries still have Covid restrictions in place for unvaccinated people coming from the UK. 

Until March 18th

Until the new rules come into effect, all travellers are required to fill out a passenger locator form. 

Unvaccinated travellers are also required to take pre-departure test and a test on or before Day 2 following their arrival. 

The UK border officers will recognise proof of vaccination provided with an EU Covid Certificate.

For the UK “fully vaccinated” means 14 days after your final dose of a EMA/FDA or Swiss approved vaccine (Pfizer, AstraZeneca, Moderna, Johnson & Johnson). 

After a period of confusion, the UK government says that it will accept mixed doses administered in the EU (eg one dose of AstraZeneca and one of Pfizer).

However people who have only had a single dose after previously recovering from Covid – which is standard practice in some European countries – are not accepted as vaccinated by the UK.

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