IWAS FIT a record year for the Esplanade Hotel in Dortmund. On February 13, its owners organized a big party to celebrate an extension of 2.5 million euros ($ 2.7 million) and to mark the moment when Katja Kortmann took over the management of her retired father. Two weeks later, the cancellations started: first a net, then a tidal wave of up to 300 per day. On March 27, the Esplanade will close its doors to guests and send its 40 employees home. The plan is to reopen on April 19, but Ms. Kortmann doubts that will happen. “It’s just tragic,” she says.
Desperate times, desperate measures. March 25, Germany MPs – two meters apart in the Bundestag – supported an extraordinary package of policies designed to protect workers and businesses across the country from the worst ravages of the virus. Even skeptical observers were surprised by the speed and daring of the government. Its package, the most complete in Europe, includes several elements, some of which are dusted from previous crises.
The main one is an expansion of Kurzarbeit (short-term work), under which the state pays 60 to 67% of the lost wages of workers with reduced hours. The program, copied across Europe, helped Germany avoid mass layoffs in 2008-2009, but Kortmann’s experience shows how things will differ this time. During the previous crisis, notes Sebastian Dullien of IMK research institute, manufacturers facing declining orders Kurzarbeit to reduce the hours of shift work. Now the program will need to strengthen outfits for consumers whose customers have evaporated overnight. Almost all of the staff at the Esplanade, including Ms. Kortmann, will be set to zero when the hotel is closed. Government plans Kurzarbeit to extend to 2.15 million workers – 5% of those who are employed – at a cost of 10 billion euros for one year.
Large companies can take advantage of 400 billion euros in liquidity guarantees issued by a new Economic Stabilization Fund, on the model of a bank bailout fund from 2008. An additional 100 billion euros can be reserved for direct equity investments in companies, including “strategic” companies at risk of buyout, and the same amount can be provided to the state development bank, which Olaf Scholz, the Minister of Finance, has promised to lend in unlimited amounts to companies in difficulty. Small businesses and freelancers from Germany’s 3 million can receive grants of € 9,000 to € 15,000 to cover fixed costs like rent, if they can prove that they have been affected by the pandemic. , which shouldn’t be difficult. With various other measures, the package amounts to 750 billion euros (although not all of it is likely to be used). Several German states offer additional assistance, and Mr Scholz alluded to a separate stimulus after the crisis.
Germany had to slaughter several sacred cows to get here. The government’s supplementary budget provides for a loan of 156 billion euros this year, or about 4% GDP, which means that the sanctified schwarze Null (“Black zero”), the non-deficit policy, in force since 2014, is a thing of the past. The Bundestag had to invoke an emergency clause in the brake on constitutional debt, which normally limits borrowing to 0.35% of the GDP. A rotating distribution of international financial institutions has long urged Germany to loosen its purse strings. It took covid-19 to do what the IMF and the European Central Bank could not.
For now, the measures will cushion the worst of it. But for small businesses with low cash reserves, aid will only go so far. Alexander Zimmer, who runs the Marienburg Monheim Manor, a conference center near Düsseldorf, is one example. Its workers will receive Kurzarbeitergeld, but he will supplement it up to a full salary to make their lives easier. He thinks he can do it for up to three months.
At European level, there has been a certain cross-border solidarity: several German states have accepted patients from overcrowded French and Italian hospitals. But the German government is not prepared to take into account requests for repayment of the eurozone debt jointly guaranteed (see article). “If we declare war on the virus, Eurobonds should be the tool of choice, but I have no hope,” said Moritz Schularick, professor of economics at the University of Bonn. The pandemic has changed a lot in Germany. But not at all. ■
This article appeared in the Europe section of the print edition under the title “Money for all”