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August 28, 2020


GERMANY: Economic measures to be extended

BY Carsten Nickel

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( 3 mins)

Amid rising infection numbers, federal and regional governments are again stepping up their efforts. But as regional states keep insisting on their own powers over restrictive measures, regulations will continue to differ across the 16 states. In contrast, on the economic front, the grand coalition has swiftly agreed on a continuation of measures to address the ongoing pandemic.

Recall how back in June, the regional minister presidents had effectively told Chancellor Angela Merkel that amid then still declining infection numbers, there was no longer any need for formal coordination with Berlin; instead, the 16 state leaders vowed to return to managing the pandemic on their own, given the mostly regional competences.

This week’s meeting reflects how the 16 regional state leaders begin to see the need for greater coordination again, now that the pandemic is back on the rise. At the very least, the minister presidents seem aware that any new restrictive measures would likely have to be discussed with Berlin again, if only to raise the public sense of urgency that comes with such a meeting and the presentation of uniform measures jointly with Merkel.

In substance, however, the meeting produced only minor changes on the restrictive front. Large public events remain banned until December, but for private events, regional states continue with their own upper participant limits. Travelers returning from high-risk regions will no longer receive sick pay during their quarantine if the trip is deemed avoidable.

These limited results reflect that despite rising infections, hospitals now have the capacities in place to deal with larger numbers of patients if they were to occur. Moreover, while the regime of 16 at times differing regional approaches to managing the pandemic is traditionally dismissed in the public debate, the truth is that such flexibility so far seems to have allowed tailor-made solutions for each regional context. It has also fostered an overall political competition between the 16 leaders, which has so far rewarded the politician most opposed to a quick reopening, Bavaria’s Minister President Markus Soeder.

The biggest obstacle Soeder has experienced so far was not a pushback against his conservative approach but, on the contrary, the impression that some of the tough measures announced by the Bavarian government have not been backed up with the required administrative capabilities on the ground. Tough questions arose when it turned out that some citizens who had undergone Bavaria’s large-scale testing regime for returning travelers had not been informed of their (at times positive) results.

On the economic front, meanwhile, the grand coalition acts at a quicker pace. A high-level meeting this week agreed on a further extension of short-time work (Kurzarbeit) schemes for up to 24 months, now available until the end of 2021. In this context, companies’ social security contributions will be fully covered by public funds until 31 June 2021. The suspension on insolvency filings will also be extended from end-September to 31 December.

The resulting impression is that the road to the Merkel succession will continue to lead via an approach to the pandemic that is both careful and effective. For now, however, the current pandemic outlook does not yet seem alarming enough to mandate tougher restrictive steps politically. In contrast, a relatively bold positioning on the economic front appears to remain political consensus for now.

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