Germany unleashes massive €550 bil package against virus

Chancellor Angela Merkel has vowed to do what it takes to tame the coronavirus crisis. (File pic)

BERLIN: The German government on Friday unleashed the biggest economic aid package in the country’s post-war history, offering companies “unlimited” credit to keep them afloat during the coronavirus crisis.

“There is no upper limit to the credit offered by (state-owned development bank) KfW, that’s the most important message,” said Finance Minister Olaf Scholz.

Some €550 billion in government-backed loans that were announced is just “for starters”, said Economy Minister Peter Altmaier.

“We promised that we will not fail because of a lack of money and political will. This means that no healthy company, no job should find themselves in trouble,” he said.

“We will reload our weapons if necessary,” added Altmaier.

The ministers also signalled that Berlin has enough funds in its treasury for a long battle.

“If it lasts longer, we can go on longer,” said Scholz.

The message to companies is that: “You can be courageous, the risks will be carried by us,” he said.

The package, even in its first stage, is bigger than the €500 billion help offered by the German government during the 2008 financial crisis.

Chancellor Angela Merkel had on Wednesday vowed to do what it takes to tame the coronavirus crisis, signalling she was even ready to suspend the cherished dogma of keeping Germany’s budget balanced.

“It is an extraordinary situation, we will do what’s necessary and luckily Germany is relatively robust… we will do what we can to get through this situation well, and we will see at the end of that where our budget stands,” she said, stressing that ending the virus crisis “comes first”.

Whatever it takes

Germany has now recorded over 2,300 cases of the coronavirus and seven people have died, according to the latest tally by DPA news agency.

As concern grows, Germany’s regional states have one by one announced that schools, daycare centres and kindergartens would be closed from Monday.

Among them were Germany’s most populous state of North Rhine-Westphalia, home to some 18 million people, as well Bavaria, Baden-Wuerttemberg and Berlin.

Merkel’s government has in recent days ramped up its response to fight not only the virus but also the impact of the contagion.

With demand from abroad collapsing, Europe’s biggest economy’s vital export industries are particularly vulnerable.

Germany is rushing through new regulations to allow more employees forced into shorter working hours to qualify for compensation.

The government had also already agreed to boost investments by €3.1 billion per year between 2021 and 2024.

The hike in investments totalling €12.4 billion will be entirely funded by 2019’s budget surplus, the coalition had announced on Monday after overnight talks.

Deka Bank chief economist Ulrich Kater said Friday’s guarantee package is a “whatever it takes from the government”.

“Like how the ECB acted correctly during the eurozone crisis, the government is now doing the same in the corona-crisis,” he noted, saying that the measures to help particularly small and medium-sized companies through the crisis are “absolutely sensible”.

“This is just the news that can stop the downward spiral.”