False incentives, fraud, debt: the side effects of the corona crisis

The Chancellor is in top form in times of corona crisis. Angela Merkel explains complicated population doubling rates and reproductive numbers. But she also knows everyday things. “They have to be washed or ironed regularly, put in the oven or in the microwave,” Merkel explains how to care for respiratory masks. “Even if that sounds a bit housewife, so to speak.”

The omniscient state – embodied in the chancellor. The subjects are explained life down to the smallest detail. With this self-image, Merkel takes “measures that have never existed in our country before”. Fundamental rights are restricted, the economy is pushed to the brink and then supported with unprecedented aid.

One of Merkel’s closest confidants, Peter Altmaier, is more than enthusiastic. “An uncle who brings something is better than an aunt who plays the piano”, the Federal Minister of Economics remembers of his childhood.

And what is brought along! If you add up everything the federal government now wants to offer to combat the corona crisis, you get a gigantic sum of at least 1.2 trillion euros. No other country in the world has raised so much money in relation to its economic strength.

Germany has a full 35 percent, far more than the EU average or the USA. Federal finance minister Olaf Scholz did not understate what he promised a few weeks ago: “It is not spilled, but padding.”


The increase in importance and power is unique. Never in the history of the Federal Republic has a government intervened so quickly and deeply in public life and thus in the economy. After the financial crisis, German government debt rose by 315 billion euros in one year. The value of the federal, state and local governments will be far exceeded in this crisis. “I am worried whether we will be able to return to normal economic policy,” says Lars Feld, Germany’s top economy.

The measures to protect health are understandable. But the question increasingly arises: what side effects do the multi-billion dollar rescue programs have? The free market is disturbed, competition is distorted, prices lose their signal strength.

“As much market as possible, as much state as necessary”, the famous words of former Federal Minister of Economics Karl Schiller lose their meaning every day.

There is a risk of higher prices, inefficient companies and loss of wealth. It is significant that more and more companies are turning to the Bundeskartellamt during the corona crisis in order to be exempted from cooperating with competitors. The new spirit of state economy speaks.

Spend as much as you can. The year 2020 will be disastrous. Kristalina Georgiewa (IMF chief)

Certainly, help for companies with no fault of their own must be provided. But with the flood of support funds, the risk of misallocation is high. Capital and labor are tied up in companies with below-average productivity, less investment and innovative strength.

A few weeks ago, after a parliamentary request from the FDP for possible support from zombie companies, the Federal Ministry of Finance had to admit that “necessary market processes of creative destruction are hindered”.

The concern is justified that the state is eating itself too deeply into the economy, throwing privacy and data protection partially overboard and that the influence on the market will not be reversed after the end of the crisis.

A look at history suggests little good. The federal government is still 25 years after the IPO Deutsche Telekom still the largest single shareholder.

Fundamentally, there is a problem that is known in the economy as moral hazard: companies and citizens behave irresponsibly or carelessly due to existing false incentives. The news of fraudsters sneaking up subsidies is increasing.

“The state is a lousy entrepreneur”

The appearances of Altmaier and Scholz are characterized by superlatives. At the federal press conference, they will be presenting the rescue packages worth billions to the public with great regularity. “This is the most comprehensive and effective guarantee that there has ever been in a crisis,” said Altmaier in mid-March. “This is the bazooka, we’ll look for small arms later,” the Federal Minister of Finance said at the appearance.

The small arms that have now been added are quite large-caliber. Scholz announced a debt-financed supplementary budget of 156 billion euros. This includes an emergency fund with a volume of 50 billion euros, which is aimed at the self-employed and small businesses with up to ten employees.

The federal guarantee for the state bank KfW is increased by up to 450 billion euros. And then there is an Economic Stabilization Fund (WSF) with a volume of 600 billion euros. The majority is earmarked for government guarantees to keep companies liquid.

100 billion euros are reserved for possible investments, i.e. partial nationalization of companies. The battered Lufthansa is already holding talks about state participation.

You can still hear Altmaier’s words: “The state is a lousy entrepreneur.” The Federal Minister of Economics at least dedicated the most beautiful hall in the ministry to Ludwig Erhard. But he is currently just as far away from Erhard’s mantra as the Germans are from summer leaves in Mallorca.

Minister of Economics Peter Altmaier (standing) and Minister of Finance Olaf Scholz (front)

The father of the “German economic miracle” throbbed to measure, he remembered sentences, the state should not be a player, but an arbitrator in the economy. Now the state is preparing to take over the entire football club.

No other industrial country is helping its economy with such large sums as the Federal Republic. This shows a new evaluation by the International Monetary Fund (IMF). He does not criticize Germany, on the contrary. “Spend as much as you can,” advises IMF chief Kristalina Georgiewa. The economic situation is too depressing.

The Council of Experts is now assuming that the economy will decline by more than 5.5 percent this year. This is the case that was previously treated as a worst-case scenario. The economic downturn would be worse than in the global financial crisis. 725,000 companies have registered financial difficulties and short-time work.

Including: hospitals. Health Minister Jens Spahn ordered them at the beginning of March to postpone all planned operations. For the hospital operator, this means severe revenue losses. More than a third of the intensive care beds are not occupied. With the Hospital Relief Act, the federal government created a regulation to compensate the clinics for the failures. But that’s far from enough.

This is the bazooka, we’ll look at small arms later. Olaf Scholz (Federal Minister of Finance)

Some private organizations have registered short-time work, including the Schön-Klinik group. The head of the German Hospital Society, Gerald Gaß, sees the time for a “careful, gradual resumption of regular care”.

Spahn also said last week that clinics could “gradually return to normal”. “We do not want to keep 40 percent of the intensive care ventilation beds in Germany permanently”, said the minister.

The pressure on the companies is huge, the need for help is great. This year alone, the federal government is raising 156 billion euros in new debt. The federal states are also preparing an extensive flood of money for pumps.

According to a survey by the Handelsblatt newspaper among the 16 state finance ministries, they are currently planning 65 billion euros in new debt to fight the crisis. In addition to the federal government’s huge € 1.2 trillion rescue package, the federal states are also helping their companies and the self-employed. Bavaria alone has launched a fund with 60 billion euros.

The IMF chief not only welcomes the gigantic aid package in Germany, the monetary fund also calls for thorough control. “Keep the bills,” said Georgiewa. Transparency and accountability should not be put off in the face of the crisis. Whether Germany is world champion in this discipline, doubts are increasing.

Risk zombie company

The financial crisis shaped a saying by the former head of central bank in Europe, Mario Draghi: “What ever it takes”. In this crisis, it becomes a “Whatever, take it!” Aid is mostly spent without checking, the money cannot be distributed quickly enough.

According to an overview by the Ministry of Finance and the Ministry of Economics, over 26 billion euros were applied for by KfW Hilfen. Almost 13,000 of the more than 13,200 applications were approved. In other words, almost anyone who wants help gets it, most likely companies that didn’t have a working business model before the pandemic.

This easily creates zombie companies that are only alive because of generous state aid. After all: With the large sums, the KfW steering committee seems to be examining it more closely. So far, around 8.5 billion euros have been approved. So it takes a little longer for the large-volume applications.

In contrast, the self-employed and small businesses with up to ten employees are suspiciously fast. So far, according to the overview of 1.65 million applications, around 1.1 million have been approved and more than nine billion euros paid out. These are not loans, but aid that does not have to be repaid.

“Speed ​​and thoroughness go hand in hand: it is carefully checked who receives the money,” Finance Minister Scholz promised. But is that true? North Rhine-Westphalia and Berlin were even recently forced to suspend immediate payments because large-scale fraudsters wanted to get to the pots.

There are also problems with honest entrepreneurs. In North Rhine-Westphalia, for example, the self-employed and small businesses are always granted the maximum amounts of EUR 9,000 and EUR 15,000 – regardless of need. This practice is not well understood in the Federal Ministry of Economics. Because a flat-rate payment of maximum amounts was actually not intended.

The aid should amount to up to 9,000 euros for companies with up to five employees and up to 15,000 euros for up to ten employees. The emphasis here is on the “up to”. According to the Ministry of Economic Affairs, the actual amount should be based on sales and operating expenses for the next three months. An entrepreneur with zero euros turnover and 1000 euros costs would be entitled to 3000 euros in emergency aid.

But these details were lost somewhere in the confusion between the federal states and the federal states. The up to 50 billion euros are provided by the federal government. Although federal money is at stake, it is up to the federal states how much they scrutinize companies. In Hamburg, for example, a liquidity check is required. Other countries are significantly less strict so that aid can flow as quickly as possible.

In Berlin, more than a billion euros were paid out to solo and small entrepreneurs within days. And the Berlin Senate also admits behind the scenes that surely there are also deadweight effects. Since no examination was carried out, almost everyone received 14,000 euros in a combination of federal and state funds. These include the self-employed, who normally have annual sales that are significantly lower, they say.

Some recipients are now voluntarily repaying the aid for fear of sanctions. But whether a subsequent thorough examination is possible to convince fraudsters is skeptical in financial management.

Dangerous false incentives

The economic nonsense, which is operated partly in the name of Corona, is great. Governments in the federal and state governments are increasingly creating the illusion that they can regulate everything with state trillions. And more and more, government intervention and expansion is creating false incentives in all areas of the economy, which can be revenged bitterly.

Take the housing market as an example: the Federal Minister of Justice, a woman from the SPD, wanted to protect the tenants. The result is a half-baked law that gets small landlords into trouble. The law was so badly made that solvent companies like Adidas or Deichmann used the gaps and simply suspended the rent payments. Only after a storm of indignation did Adidas row back.

Take the example of KfW loans: After the institutes hesitated to pass on the subsidized loans from the Staatsbank KfW to companies because they still had to bear ten percent of the default risk, the state assumed full liability. With the danger that house banks will now be able to provide loans to companies that have long been bankrupt.

The banks don’t care, they are released from any liability, but of course they still make good money from their business. The fool is the taxpayer who has to answer for the defaults.

Example of short-time work: Short-time work allowance is a tried and tested crisis instrument. The state replaces up to 67 percent of net wages. However, the SPD was not enough. In the coalition committee on Wednesday, she pushed for an increase to 80 percent.

It is the most comprehensive and effective guarantee that there has ever been in a crisis. Peter Altmaier (Federal Minister of Economics)

However, a general increase would have significant deadweight effects: Many companies are already increasing short-time benefits from their own resources. Apart from that, the short-time work allowance is not meant to secure the standard of living, but rather to ensure the survival of companies and thus avoid unemployment.

In other areas, the federal corona strategy is rather arbitrary. The craft complained that the vehicle registration offices were closed. There is also much discussion about opening shops up to the limit of 800 square meters. This border was communicated at least improperly and caused confusion and indignation among the shopkeepers.

Now a Hamburg administrative court has declared the 800 square meter rule to be illegal. The court could not understand why opening larger sales areas alone should attract more people to the city center. Necessary infection protection measures could be followed at least as well in larger stores as in smaller facilities.

Whimsical and impractical was initially the requirement that repair shops were allowed to remain open, but the sales rooms had to be closed. Many craftsmen wondered if they could lead the customers through the sales room into the workshop. Another detail from this series of undesirable side effects of the rescue policy.

The border closures, for example with the Czech Republic, mean that the bricklayers are missing in the construction industry and the harvest workers in agriculture from Romania. The state decides a lot, but the consequences are borne by the entrepreneurs and their employees.

The argument for the state’s rapid generosity in the crisis is: rather spend more now to prevent the economy from crashing and millions of jobs be lost than have to finance mass unemployment for a long time. This approach is absolutely correct. But it also remains true: somehow the state rescue billions have to be financed at least in the medium term if the next generations are not to be overwhelmed.

Currently this is done through the use of reserves and debts. Germany certainly has scope. The Federal Republic had just pushed the debt level to below 60 percent, thereby meeting the Maastricht criteria for the first time in many years in 2019. But that will be the last time for a long time.

As a result of the corona crisis, the federal government expects a general government deficit of 7.25 percent of gross domestic product (GDP) this year. The debt ratio as a share of all debts in GDP is estimated at 75.25 percent, as can be seen from the German Stability Program 2020.

“The projection is currently subject to very high levels of uncertainty,” says the current report. In other words, the debt level could be even higher. This mainly depends on how high the losses are that the federal government will incur from its guarantees and sureties.

Given the huge commitments, some in the grand coalition are trying to put the brakes on. “I don’t like the fact that we almost always get new suggestions every hour, what else can you do,” said Union leader Ralph Brinkhaus. “All of this must also be paid for.”

In a crisis, the state’s money is loose. Some sense their chance to finally implement long-held plans.


Corona is bringing poverty back to emerging markets

Berlin, Dusseldorf, Istanbul, Cape Town, Vienna In the beginning, it was the emerging Asian countries that suffered a corona shock – infected by China. In the meantime, however, the virus has infected the economy in emerging countries worldwide, including in Eastern Europe.

In Romania, for example, the pandemic abruptly ended the boom of the past few years. One million people are unemployed and another 950,000 are in employment. In March alone, economic output in south-east Europe, the largest country with 19 million inhabitants, fell by 30 percent.

In Turkey, on the other hand, a country that was just starting to work its way out of a phase of weakness, every third car supplier has stopped operating since the beginning of the year, reports Alper Kanca, President of the Taysad industry association. The Turkish companies are closely involved in the European supply chains.

75 percent of all exports go to Europe. “If the plants there remain closed, we cannot produce here either,” says Kanca. The same applies to tourism: the vast majority of guests in Turkey come from European countries.

Whether Romania, Turkey, Russia, Indonesia, Egypt or South Africa, Brazil or Mexico: the economies emerging in the wake of the billion-dollar states of China and India are threatened by the pandemic to be pushed back into poverty.

Lack of demand from the industrialized countries

Because the virus finds a much broader target in emerging countries than in rich industrialized countries: The economy not only suffers from exit restrictions, but also as a pre-supplier from the lack of demand from the industrialized countries. And, as in previous crises, foreign investors are fearful and are massively withdrawing capital.

The consequences are drastic: local currencies plunge against the global currency, which means that national budgets can no longer shoulder their foreign debts and companies can shoulder their foreign currency loans. The economy is slumping longer and longer – and the more it is based on raw material exports, for example in Russia.

There is another drama in the corona crisis: the healthcare system is even less resistant to the virus than in Italy, Spain and France, the hard-hit countries of Western Europe. In Romania, for example: “The health system is going through difficult times due to its poor management, the brain drain and the worst financing in an EU comparison”, says analyst Radu Magdin from Bucharest.

The situation in the hospitals is still under control. “But if there were a strong increase in infections, the exposure limit would be reached quickly,” says Martin Sieg, head of the Konrad Adenauer Foundation in Bucharest. The number of migrated doctors is said to be 20,000. There are also no caregivers in old people’s homes.

The government under the conservative Prime Minister Ludovic Orban therefore banned the emergency decree that Germany and Austria bring medical and social workers by plane. Medical personnel may no longer terminate for the duration of the emergency.

Health care on the borders

Healthcare is also reaching its limits in Ukraine. More and more doctors and nurses have to look after their colleagues in hospital: 784 medical staff are infected with the virus, including 100 new cases since Wednesday alone.

This is a high proportion in 4,161 corona cases in the country. Ukraine and other poorer emerging economies cannot compete when rich Gulf and industrialized countries buy respiratory masks and other medical supplies in China at horrific prices.

The Vienna Institute for International Economic Comparisons expects the recession in Eastern Europe to become deeper than during the financial crisis. For many emerging economies, the now waning influx of capital from abroad means that they will not be able to continue to finance their large current account deficits. “We expect that many countries will use multilateral support in the coming months,” says economist Elina Ribakova from the Institute of International Finance (IIF), a lobby organization for financial institutions.

Growing debt is driving many countries to the brink of state bankruptcy, which Lebanon and Argentina have already passed. The International Monetary Fund (IMF) had to switch to emergency operations in March: it plans to use all of its trillion dollars in the crisis. “We have to answer an unprecedented number of emergency calls,” says IMF chief Kristalina Georgiewa. The $ 50 billion emergency program has been doubled.

More than 100 emerging and developing countries have applied for aid from the IMF in the past two months. According to the IMF, international investors have already withdrawn $ 100 billion from emerging and developing countries since the beginning of the year – more than during the Asian crisis of the 1990s and the financial crisis of 2008/2009.


The spring meeting of the IMF and World Bank, at which finance ministers and central bank heads as well as development ministers from 189 countries discussed the world economy, turned into a world crisis meeting via video conferencing – this is also due to the virus.

For the poorest 25 developing countries, the richest 20 countries (G20) agreed on Wednesday to defer interest and repay bilateral government debt by the end of this year. “That won’t be enough,” said Georgiewa. It demands longer debt moratoriums and grants to poor countries to help them overcome the recession.

During the spring conference, she and the World Bank chief David Malpass made several appeals to the G20, but please – as in the financial crisis – develop a joint program for the recovery of the global economy. An appeal that largely died away.

“The crisis in the emerging countries is just beginning,” says Sergei Gurijew, professor at the Paris SciencesPo and former chief economist at the EBRD in Eastern Europe.

One country in crisis pulls the next. In Asia, for example, the economy will not grow in 2020 for the first time in 60 years, the IMF stated on Easter Tuesday in its economic forecast. Like Latin America, Eastern Europe is therefore facing a 5.2 percent drop in economic output. South Africa must expect economic output to shrink by 5.8 percent.

The Turkish economist Ali Agaoglu now expects that Turkey will still have to ask for help from the IMF, even if President Recep Tayyip Erdogan still rules it out. In any case, the government’s rescue program will not be enough to get the economy going again, he believes.

Hardly any emerging country is as badly prepared for the corona pandemic as South Africa. “The government has wasted so much money and driven so many investors out of the country in the past ten years that the state treasury is empty and the scope for fiscal stimuli is correspondingly small,” says Frans Cronje, head of the independent think tank “Institute of Race Relations.” “.

The five-week curfew imposed until the end of April will have an impact primarily on small and medium-sized companies. But they are South Africa’s job engine. “Hundreds, if not thousands, of small businesses will go bankrupt with devastating consequences for the labor market,” feared business consultant Dirk de Vos.

The virus is already hitting a country with record unemployment of 30 percent and zero growth. Some observers now expect unemployment to rise to 50 percent – a drama from which the country will hardly be able to recover quickly.

Experts are most likely to hope for a reasonably quick recovery for Eastern Europe. The countries could benefit from a relocation of factories of European companies from Asia, said the managing director of the East Committee of the German economy, Michael Harms.

Because: “These countries are very competitive.” Romania, Serbia, North Macedonia, Belarus and Ukraine could be winners of a withdrawal from Asia, said Harms. For Ukraine, however, this only applies if it can escape state bankruptcy with the help of the IMF.


The world in the worst recession since the Great Depression of the 1930s

The global economy is expected to fall 3% this year, before a hoped-for strong rebound in 2021, the IMF predicts.

Kristalina Georgieva, Director of the IMF.
Kristalina Georgieva, Director of the IMF. NICHOLAS KAMM / AFP

The days when the Managing Director of the IMF, Kristalina Georgieva, estimated the impact of the coronavirus at … 0.1 point of world GDP! It was just a month and a half ago on February 23 at a G20 meeting in Saudi Arabia. Since then, the IMF has revised its economic forecasts downward in the most radical way ever seen in such a short period. “The world has radically changed in three months”, points out the International Monetary Fund. Relative to its January estimates, the global economy is undergoing a sharp 6.3-point growth point, from a growth forecast above 3% to a recession of -3%.

Meanwhile a “Rare disaster”, to the “Magnitude unrelated to what we experienced in our lifetime”, has knocked the planet’s economy down, says IMF chief economist Gita Gopinath. Worse than the 2008-2009 financial crisis, that of the “Great containment” has had no equal since the Great Depression of the early years

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IMF expects worst economic crisis since 1929

Berlin The corona pandemic plunged 170 of the 189 member states of the International Monetary Fund (IMF) into recession. 160 months ago, 160 of them had good prospects for economic growth.

IMF chief Kristalina Georgieva announced in Washington on Thursday that the fund would describe the worst economic decline since the Great Depression in its World Economic Outlook report next Tuesday.

The IMF sees its task as helping liquidity through the crisis to countries in need. “We are providing over a trillion dollars in loans to our member states,” said Georgieva. Emergency loans have been increased to $ 100 billion.

And – very unusual for the IMF, which otherwise always ensures that its loans are paid on time – Georgieva announced that it would “overhaul our toolbox”. The goal is that states with unsustainable debt can also receive IMF funds for the targeted fight against Corona.

The disaster relief fund for debt relief is therefore also topping up: the rich industrialized countries are working to increase this “CCRT” fund to $ 1.4 billion in order to be able to grant states debt relief. The high number of countries in financial crises shows that emergency loans are necessary: ​​90 countries have already asked the IMF for financial aid.

According to Georgieva, emerging and developing countries in particular mostly do not have the means to adequately equip their health systems for the pandemic. It therefore campaigned again for richer countries to cancel bilateral debts for the poorest developing countries.

“Every fifth company in Germany could go bankrupt”

“2020 will be catastrophic,” said the IMF chief. So far, the fund expects global economic recovery to begin in 2021. However, this is by no means certain. The IMF therefore called for finance ministers and central bank heads to agree on a joint approach to the pandemic at their virtual spring meeting next week.

The IMF sets four priorities for this:

  • First, all states would have to Curb the spread of the virus and the Health systems strengthen.
  • Second, they should go with generous help Companies and employees help through the crisis. So far, the states have provided $ 8 trillion worldwide for this.
  • Third, everyone should make sure that the Banks are not in great stress through defaulting loans devices and this creates a financial crisis.
  • And fourth, all states would have to plan for the recovery.

The central banks should continue to provide cheap money for countries without inflationary pressure. And governments should stimulate consumption. When exiting from a standstill, all states should proceed step by step according to careful plans.

More: The developments in the corona crisis in the live blog.


Fear of an emerging market crisis is growing

In times of crisis, these economically emerging countries are usually under particular pressure – and this is the case now. Many economists are now expecting the effects on emerging economies to be particularly blatant. The classic ingredients of a crisis are currently coming together: investors are pulling out capital, their currencies are under pressure and the burden of debt, which is often quoted in dollars, is increasing. Economists already expect that some countries can no longer cope with the consequences on their own.

According to data from the Institute of International Finance (IIF), an international lobbying organization for banks, investors pulled $ 83.3 billion in capital from emerging markets in March. “This record outflow of capital is significantly larger than during the 2008 financial crisis,” the IIF said.

The IIF chief economist Robin Brooks writes on Twitter that there is currently a “significant reassessment of the emerging countries”. The chief economist of the US asset manager MFS, Erik Weisman, sees it similarly: “The area with the greatest risks worldwide is the emerging markets – with the exception of China.

The International Monetary Fund (IMF) is also concerned. At a conference call with finance ministers and central bank heads of the 20 largest industrialized and emerging economies (G20), his boss Kristalina Georgiewa recently warned that emerging economies and low-income countries were particularly affected by the crisis.

There are several reasons why emerging markets are vulnerable to the current crisis. A classic problem is that in countries such as Brazil, Mexico, South Africa or Turkey, many companies, but also partly the government, are in debt in foreign currencies, especially in US dollars. MFS chief economist Weisman points out that the level of debt denominated in dollars has increased further in the current economic cycle. Then, when the domestic currency depreciates against the dollar, the burden of its debt increases.

And that is exactly what happened: Many emerging market currencies have recently depreciated significantly against the US dollar. The Brazilian real, the Mexican peso and the South African rand have lost more than 20 percent of their value against the US dollar since the beginning of the year. The Turkish lira fell by around eleven percent in the same period. “The strength of the dollar is certainly not helpful in the current situation,” says Weisman.

A weaker dollar would make it easier for emerging markets to deal with their problems. But it doesn’t look like that at the moment. On the contrary, because investors are pulling their capital out of the emerging countries, their currencies are under pressure, which is fueling new uncertainty – a vicious circle.

The dollar dependency also means that most emerging economies have less fiscal leeway to respond to the crisis. Because higher budget and current account deficits can increase the depreciation pressure of their own currency.

No powerful central banks

And they don’t have a central bank as powerful as the United States or the euro zone. The US Federal Reserve and the European Central Bank (ECB) have made large amounts of liquidity available since the crisis began. In the United States, the Fed buys money market paper, securitizations, government and mortgage bonds and other assets, thereby stabilizing the respective markets – the ECB does a similar thing in the euro area. “There is no Fed safety net for emerging market debt in dollars or local currency. These are assets that are not covered, ”says Weisman.


He also believes that the current crisis will also result in a trend away from globalization that could affect many emerging countries. The trade war between the United States and China has already caused companies to rethink. Weisman expects this trend to intensify again. “Multinational corporations have expanded their supply chains too far. You will have to bring them closer to the home market again, ”he says.

The economist assumes that US companies will rely more on suppliers in the United States and from neighboring Mexico and Canada. He also expects regionalization of the supply chains for European and Chinese groups. “Many emerging markets outside of these centers will be in a weaker position as a result.”

A further negative factor in many emerging countries is the drop in raw material prices. Countries such as Russia, but also Brazil or Nigeria, depend heavily on income from raw material exports, which are now abruptly breaking down due to the paralysis of the economy.

The IMF is gearing up for help

Overall, the environment for the emerging countries is currently extremely difficult. MFS chief economist Weisman considers countries with high deficits in the budget and in the current account, i.e. in the trade of goods and services with foreign countries, to be particularly vulnerable. “Turkey, Brazil and Argentina face major challenges,” he says.

Handelsblatt Morning Briefing - Corona Spezial

How extreme the consequences become depends primarily on how quickly the virus can be narrowed down. It is already foreseeable that the IMF will have to help emerging countries. “I think the IMF will have to help some countries in the form of bailouts or debt restructuring,” Weisman says.

“It would be surprising if there were no emerging markets in such a crisis that needed debt restructuring.” The IMF is already preparing for this and is considering making more precautionary lines of credit available. According to their own estimates, emerging economies will need $ 2.5 trillion in support. And, according to IMF chief Georgiewa, this is a cautious estimate.

More: Standstill in Brazil – Bolsonaro’s course in the Corona fight is like an odd journey.


35-year-old becomes deputy director of the IMF


Geoffrey Okamoto, 35, succeeds David Lipton as the institution’s vice director.

(Photo: AFP)

Berlin The pilot has disembarked and will be replaced by a novice: In the middle of the worst economic crash since the Second World War, the International Monetary Fund is reorganizing its management team.

The experienced Vice Director David Lipton has been – involuntarily – retired. He is followed by Geoffrey Okamoto, 35, a close confidante of Steven Mnuchin, Treasury Secretary. The IMF officially announced this on Thursday.

According to a post-war gentleman agreement, the Europeans appointed the IMF director and the US government was allowed to appoint the first deputy. The ancestors are characterized by top economists and high-ranking officials from the US Treasury. Lipton also followed this tradition. He was a member of the economic advisory board of US President Barack Obama before joining the IMF in 2011.

There Lipton acted as the right hand of the then boss Christine Lagarde and was extremely influential. Lipton was not only responsible for day-to-day business, but also for the strategic orientation of the monetary fund. Lagarde, who was a lawyer and not an economist, left Lipton a lot of space and trusted his advice. She acted more like a president, representing rather than directing.

Lagarde’s successor, the Bulgarian economist Kristalina Georgieva, has other ideas, she wants to take on her management responsibilities more directly. Georgieva draws on skills that Lagarde delegated to Lipton.

IMF chief Georgieva is satisfied

With the inexperienced Okamoto she gets a substitute who will hardly get in her way. Georgieva was very pleased with the personnel decision: “The IMF is doing everything it can to help our members overcome this crisis – and Geoffrey will play a key role in our efforts.”

Georgieva has already announced that the IMF will use all of its power to fight the crisis. The Monetary Fund plans to mobilize up to $ 1 trillion in loans to help countries cut off from the financial markets.

The corona pandemic has already led to panic sales. Investors withdraw their capital from risk markets, the currencies of emerging countries are experiencing strong losses in the currency markets.

As a result, companies and governments there are finding it increasingly difficult to service their loans. Data from the Institute of International Finance show that capital outflows from emerging markets triggered by the Corona shock even exceed the level of the 2008 financial crisis.

More: The IMF calls on states to work together to fight the crisis.


IMF calls on states to work together to fight the crisis

Kristalina Georgieva

The IMF chief calls for a global vote in the fight against the corona virus.

(Photo: AFP)

Berlin The International Monetary Fund (IMF) has called for closer global coordination in the fight against the corona crisis. “With the spread of the virus, increased coordination of measures will be the key to strengthening confidence and stabilizing the global economy,” IMF Director Kristalina Georgieva wrote in a blog entry.

In order to prevent long-term economic damage, a further increase in government spending is necessary: ​​”The argument for coordinated and synchronized global economic measures are getting stronger by the hour,” said the IMF chief. It reminded of the common reaction of the industrialized and emerging countries to the 2008 financial crisis. However, there is currently little evidence of the willingness to cooperate at the time.

The IMF also advises close international coordination and further easing of monetary policy. The European Central Bank and the US Federal Reserve, which have adopted measures in the past few days, may feel confirmed in their course. The Monetary Fund also considers it advisable to give banks flexibility in applying the regulations.

The G7 countries discussed the crisis on Monday, while the finance ministers of the euro zone met for a video conference. The Eurogroup effectively suspended the debt provisions of the European Stability Pact. In addition, the Euro Rescue Fund EMS should check whether it can take measures. The EU states want to coordinate their controls at the European internal borders better.

In Germany, the federal government is stepping up the fight against the crisis. The extended short-time work that was only approved in Parliament on Friday is now even to apply retroactively to March 1st. Justice Minister Christine Lamprecht (SPD) also wants to suspend the three-week filing of insolvencies. This is to prevent companies from going bankrupt simply because aid has not reached them in time.

More: Eurogroup examines ESM aid program against economic consequences of the epidemic.


IMF calls for “more than not enough”

If the US Federal Reserve pulled the first one, the Europeans simply claimed to be “Ready to take further action”, without revealing any concrete action

IMF Managing Director Kristalina Georgieva (left) speaks at a press briefing with President of the World Bank Group David Malpass in Washington, DC on March 4, 2020.
IMF Managing Director Kristalina Georgieva (left) speaks at a press briefing with President of the World Bank Group David Malpass in Washington, DC on March 4, 2020. NICHOLAS KAMM / AFP

In the aftermath of the surprise rate cut by the US Federal Reserve, Congress voted an emergency envelope of $ 8.3 billion on Wednesday to support the economy against the coronavirus. The IMF encourages the international community to do so “More rather than not doing enough”. For their part, Europeans prefer to wait.

Finance ministers from the EU just said after a telephone meeting “Ready to take further action”, without revealing any concrete action. Bruno Le Maire, who called for a budgetary response, will have to be content with intentions. “We will spare no effort to protect our economies from greater consequences” than those already noted, assured Mario Centeno, Portuguese president of the Eurogroup.

The Standard and Poor’s agency halved its growth forecast for the euro zone at 0.5% for the year (0.7% for France). The wait-and-see attitude of the Twenty-Seven is tantamount to dismissing

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cancellable at any time


Financial institutions and technology companies cancel major events

WBecause of the corona virus, the International Monetary Fund (IMF) and the World Bank canceled their spring meeting in Washington. Instead, the consultations are to be held in a virtual format – i.e. via internet communication, among other things, as announced by both financial institutions. In this way, a “productive dialogue” should be made possible, said IMF chief Kristalina Georgieva and World Bank president David Malpass.

The spring meeting was scheduled for April 16-18. The IMF and World Bank meetings, which are usually held twice a year, bring together thousands of government and private sector representatives. Numerous journalists also come from abroad for this. The corona virus crisis has already led to the cancellation of numerous major events around the world.

Facebook, Google, Adobe and Nvidia

According to Facebook Google also canceled its California developer conference planned for May, Instead, they will look for other ways to keep in touch with the software developers, Google said on Tuesday. The Google I / O conference was planned for this year from May 12th to 14th near the corporate headquarters in Mountain View.

The developer conferences, attended by several thousand participants from all over the world, are among the most important events for the tech companies. Here they present new products, provide insights into the strategy and seek contact with partners and journalists.

Facebook already canceled its F8 developer conference scheduled for the week before the Google I / O a few days ago. Software provider Adobe and graphics card specialist Nvidia also canceled their big annual meetings.

Microsoft maintains appointment

Microsoft’s developer conference Build, on the other hand, is still planned for May 19-21 in Seattle. However, the software company has already warned that there could be changes. Apple has not yet commented on its WWDC developer conference, which traditionally takes place in Silicon Valley in early June.

According to announcements from the developer conferences, companies are likely to resort to live streams with product presentations and other announcements. Some smartphone providers already did that after the cancellation of the Mobile World Congress in Barcelona in February. However, in many cases media attention remained lower than usual.


Facts & current data in development

Dusseldorf After the five confirmed coronavirus cases in North Rhine-Westphalia, the authorities are now using larger actions to search for possible further infected people.

Around 300 visitors to a carnival event in Gangelt in the Heinsberg district are invited to report to the authorities. All visitors and their families would have to go into quarantine at home for 14 days, announced the NRW Ministry of Health on Thursday night, The Maria Hilf Hospital in Mönchengladbach is looking for people who have had contact with a doctor infected with the coronavirus.

According to the authorities’ knowledge, all previously known infected people had contact with a Gangelt couple who is currently being treated at the University Hospital in Düsseldorf. It is now crucial to find all contacts of the infected, said a spokesman for the NRW Ministry of Health on Thursday morning.

During the day, the authorities expect many more test results from contacts who may have contracted the couple. These include, for example, the couple’s children, around 65 children in a daycare center and dozens of participants in the carnival event. Depending on the results of these tests, the authorities would decide whether home quarantine would be ordered for other groups of people.

With the measures, the authorities want to prevent the new corona virus from spreading any further. NRW Minister of Health Karl-Josef Laumann (CDU) had already made it clear on Wednesday: “We cannot guarantee that we will get the infection chains stopped.”

In Germany, nine infections had become known between Tuesday evening and Wednesday evening. A patient from Erkelenz in North Rhine-Westphalia was brought to the intensive care unit of the University Hospital Düsseldorf in critical condition on Wednesday night. The University Hospital Düsseldorf also treated his 46-year-old wife. On Wednesday evening, it was announced that a man’s employee and her partner were also infected.

The couple had been in contact with many people in the past few days, said NRW Minister of Health Karl-Josef Laumann (CDU). The woman therefore worked as a kindergarten teacher until Friday. The couple’s two children have had no symptoms so far, Laumann said. A test should clarify whether they are infected. The children in the kindergarten where the woman works should also be tested. It was unclear where the couple got infected.

Spahn said Germany was still in the phase of early detection of possible infections and isolation of contacts. However, the phase could occur in which not all contacts could be determined. Overall there is Germany with it 27 confirmed cases, 15 of which were cured. A dead person is not known yet,

According to the Ministry of Health, a 25-year-old from the district of Göppingen was among the patients from Baden-Württemberg. He probably got infected with Sars-CoV-2 while traveling to Milan and developed flu-like symptoms when he returned. He is being treated in a clinic in Göppingen.

According to the University Hospital Tübingen, the other cases are his 24-year-old travel companion and her 60-year-old father. He works as a senior physician in the pathology of the university clinic. Both are treated in isolation in the hospital. “They are in good condition and comfortable,” said Nisar Malek, medical director at the medical clinic.

In addition, the virus was detected in a 32-year-old in the district of Rottweil, as the Ministry of Health in Stuttgart announced. He had been to Italy recently. In Rhineland-Palatinate, the Sars-CoV-2 virus, which can trigger the lung disease Covid-19, was detected in a soldier. He is being treated in the Bundeswehr central hospital in Koblenz, the Bundeswehr said.

Want at noon Federal Minister of Health Jens Spahn and Federal Minister of the Interior Horst Seehofer inform in a press conference about the establishment of a joint crisis team,

An overview of further developments regarding the course of the epidemic:

  • To date, 82,164 people have fallen ill worldwide. 2801 of them died from the virus, Most cases are in China, followed by South Korea.
  • South Korea reports the largest increase in new infections since the first case occurred on January 20 in the country. Accordingly came on Thursday 334 new cases added. With that meanwhile 1595 People infected with the pathogen that triggers Covid-19 lung disease. From the outbreak is Daegu – the fourth largest city in the country – particularly badly affected, Here alone there were 307 of the 334 new cases. Yes, there is Signs of spread in the rest of South Korea: So far 55 cases have been reported from the capital Seoul, 58 from the second largest city Busan.
  • In China the situation remains tense. The total death toll in China rises to 2,641, the number of infections detected climbed to 78,497.
  • In Germany there are meanwhile 27 proven cases15 of these have been cured, the death of a corona patient is not yet known.
  • The Marburger Bund sees Germany well prepared for the spread of the virus,
  • The The United States and South Korea have postponed their joint military maneuversMeanwhile, US President Trump sees his country well prepared.
  • The Number of recoveries increases to over 32,000 – 23,222 of them in the crisis region of Hubei. For more than a week now, the number of global recoveries has exceeded the number of new infections – mostly significantly.
  • In Italy is the spread of the Pathogen in more and more regions demonstrated. Meanwhile 322 people infected, of them eleven diedsaid Chief of Defense Angelo Borrelli. How such a rapid outbreak could have happened is not yet known. In Lombardy ten municipalities in the province of Lodi declared restricted areas,
  • After the outbreak of a coronavirus epidemic in Italy reported on Tuesday more and more European countries evidence of the pathogen – underneath Austria, Croatia, France, the mainland Spain and the Switzerland, Cross-border travel bans are, according to several European countries, not an appropriate answer, even given the outbreak of coronavirus in Italy. The German Health Minister Jens Spahn said on Tuesday in Rome after a crisis meeting.
  • Many of the new evidence in European countries stand in connection with the one who was particularly badly affected recently Italy, So it was on the Spanish Vacation island Tenerife a visitor from Lombardy tested positive for the virus, according to the Spanish Ministry of Health. The region is currently the area most affected by the virus in northern Italy. After the confirmed illness became a big one Hotel with around 1000 touristsin which the patient lived – including Germans – practically quarantined,
  • in the Iran the number of fatalities reported rose from 19 to 139 people nationwide. Iran’s regional neighbors Iraq, Kuwait, Bahrain and United Arab Emirates reported several new cases of patients who had previously traveled to Iran.
  • Thailand reports three new cases of coronavirus. This brings the total number of infections to 40
  • El Salvador Has an entry ban for travelers from Italy and South Korea. Salvadoran nationals and diplomats arriving from these countries must be quarantined for 30 days.
  • The U.S. government wants to fight the new corona virus $ 2.5 billion provide. According to US media reports, around $ 1 billion of the funds will go into developing a vaccine.
  • The President of the Fed (Fed) in Dallas, Robert Kaplan, sees no need to look at the economic consequences of spreading the virus with short-term rate cuts to react.
  • Concern about a possible cancellation of the Tokyo Olympics Japanese investors are worried this year. The shares of the largest Japanese advertising agency Dentsu slide to a seven-year low for the sixth consecutive day.
  • The government in New Zealand has extended the entry ban for travelers from mainland China. The restriction applies for another eight days and will be reviewed again afterwards, Prime Minister Jacinda Ardern said at a press conference. New Zealand has so far no confirmed cases of the virus.

First coronavirus case confirmed in NRW

What else you should know:

According to an analysis presented by China’s health authority, the vast majority of cases – more than 80 percent – show only mild symptoms. Almost 14 percent of those affected develop severe symptoms such as shortness of breath, and almost five percent of life-threatening effects such as respiratory arrest, septic shock or multi-organ failure. There is no special therapy for Covid-19. Seriously ill patients are treated symptomatically: with antipyretic agents and sometimes mechanical ventilation.

Many people have only mild cold symptoms with chills and sore throats, or no symptoms at all. There may also be fever, cough and breathing problems, such as those that occur with flu. Headaches or diarrhea are also possible. The incubation period – the period between infection and the onset of symptoms – is usually two to 14 days according to the current status.

The Handelsblatt reports:

More: You can find all the latest developments in the coronavirus epidemic in our news blog.