Ifo business climate index falls to record low

Berlin The mood in Germany’s economy is catastrophic. The most important leading indicator, the Ifo business climate index, fell from 85.9 to 74.3 points in April. This is the lowest value ever measured. There has never been a stronger decline. “This is mainly due to the massive deterioration of the current situation,” said Ifo President Clemens Fuest on Friday.

In addition, companies have never been so pessimistic about the coming months. “The corona crisis hits the German economy with full force,” said Fuest. The crisis is now affecting all industries. Even the main construction industry is now worried about the future. So far, together with consumption, it has been the pillar of the economy.

The fact that the effects of the corona-related standstill would hit companies hard in April had become clearer every day since Easter. On Thursday, the Ifo reported that the crisis had hit the labor market: in industry and service providers, one in five companies surveyed by the Ifo want to lay off employees or not to extend temporary jobs.

It is 15 percent in retail, and two percent on construction that has so far been little affected by downtime. In almost all industries, more than 40 percent of companies want to postpone investments – even 31 percent of them are in construction.

How deep the recession will become in 2020 is currently difficult to estimate. “We do not know how much we can start the economy up again without increasing the risk of infection,” Monika Schnitzer told the Handelsblatt. The situation is not comparable to any post-war recession. However, she is confident that Germany will get there in the next few weeks if protective measures are increased and tracing apps are increased.

The purchasing manager index of the IHS Markit institute also fell to a record low on Thursday. In this manager survey, 75 percent of service providers and almost as many industrial managers said that their sales had shrunk significantly. Service providers’ sales fell more than ever in the 20-year history of this survey.


“Both domestic and export demand has collapsed,” writes IHS Markit economist Phil Smith. In the service sector, more jobs were cut than at the height of the financial crisis recession in April 2009, and in industry, too, the reduction in personnel accelerated – despite short-time work.

In any case, leading economists are starting to further lower their forecasts for 2020. The head of economic operations, Lars Feld, now expects that gross domestic product (GDP) will shrink by at least five and a half percentage points in 2020. It could shrink more than in the 2009 financial crisis recession.

Three and a half weeks ago, when the Economic Advisory Council for Economic Affairs Peter Altmaier (CDU) presented a special report on the corona pandemic, a minus of five and a half percent was still the worst-case scenario. However, the IMF expects German GDP to collapse by seven percent in 2020.

Even in the large economic research institutes, which predicted a minus of 4.2 percent for 2020 in their joint diagnosis two weeks ago, many expect that a five will be before the decimal point. The markets are therefore eagerly awaiting which recession forecast the Federal Government will commit to in the coming week.

However, Stefan Kooths, economic expert at the Kiel IfW, also warned that he would now outdo himself in horror scenarios: that April would be the low point of the year and that GDP would decline by ten percent in the second quarter, he said in early March already expected. The question now is how quickly a recovery can begin.

France: lowest since 1980

However, this also depends on how quickly the economy in the EU countries most affected by the pandemic can get going again, Italy, Spain and France. “As intertwined as our economy, for example, with that in Italy, we have to be very interested in the EU not breaking apart,” said Schnitzer. “It is not just about solidarity, it is in our interest if we help other EU countries,” she emphasized.

However, the prospects for the economy are currently catastrophic in all large EU countries. For example, the IHS Markit Purchasing Managers’ Index fell to a record low for the euro zone on Thursday. In Italy, the IMF expects GDP to decline 9.1 percent this year.

The mood in France’s economy also deteriorated massively in April due to the corona crisis. The business climate has dropped to the lowest level since the start of the surveys in 1980, according to data from the national statistical office Insee on Thursday. The index fell by 32 points to 62 points. There has never been such a sharp drop.

Economic activity in France was 35 percent lower in April than it was before the economy shutdown in March. Insee also does not expect the business climate to recover anytime soon. In this unprecedented environment, the behavior of companies and consumers can hardly be predicted. The French government expects gross domestic product to decline by eight percent this year.

More: According to the Ifo Institute, a fifth of German companies are planning to cut jobs due to the corona crisis.


Low earners get away the worst with short-time work benefits

Frankfurt The coalition committee has decided to increase short-time work benefits to 70 and 77 percent of the net wage loss from the fourth month. However, calculations by Lorenz Jarass from the Rhein-Main University of Applied Sciences show that high-earning employees on short-time work can already come up with replacement rates for the net loss of earnings of 80 percent – if you include tax effects that occur in the annual tax return. On the other hand, such effects hardly occur with low earners. The technical essay is to appear in May in the magazine “Der Betriebsberater”.

So far, short-time workers without children have received 60 percent, and those with children 67 percent of the loss of earnings after taxes and social security contributions. In fact, according to Jarass calculations, the bottom line is a lot more.

The range for the cases examined by him ranges from 67 percent to 81 percent. If short-time work benefits were increased, the effective replacement rates would shift upward, if not necessarily proportionately.

Why are the actual rates higher than the official rates?

The partial compensation of the loss of net wages is only approximate, in a generalized procedure. Because the actual tax deduction with and without short-time work is only determined at the end of the year in the tax return.

Since the tax rate also rises with increasing income, the effect of short-time work on net wages also depends on the income of a jointly assessed partner.

In the case of short-time work that does not last all year, the corresponding loss of earnings lowers the tax rate for the rest of the year. Employees are then reimbursed for overpaid wage tax. Since this is a direct consequence of the measure, this reimbursement, calculated over the short-time working months, can be added to compensate for the loss of earnings.


On the other hand, short-time work benefits are subject to progression. It is not taxed, but it does make the tax rate used to tax the rest of your income a little higher.

How much of their net income workers can effectively lose in short-time work can therefore only be determined by means of rather complex calculations for specific case constellations.

How does the effective reimbursement rate depend?

  • Children: Employees with children on the income tax card receive 67 percent of the short-time allowance, and only 60 percent without children.
  • Duration of short-time work: If short-time work is only carried out for a month, the tax savings for the year are only distributed over this one month. The rate of compensation for loss of earnings is correspondingly high. The replacement rate becomes lower with longer short-time work.
  • Income: Those who receive a higher salary benefit more from the lowering of the tax rate in the annual tax equalization because the reverse progression effect in the form of a lowering of the tax rate has a stronger impact.
  • Spouse splitting: Anyone who uses spouse splitting as a married single earner has a relatively low tax rate anyway and receives relatively little reimbursement due to the loss of earnings due to short-time work in annual tax compensation. If you have a spouse who earns a lot, you have a high tax rate and therefore receive a relatively high tax refund due to loss of earnings due to short-time work.

For his essay, Jarass calculated the effective net wage replacement rates for short-time work of 100 percent, if not at all. And for a period of one, three and six months, for single people with and without a child, and for married people with a child who are either single earners or have an equally well earning partner who is well disposed to work with them.

As a gross monthly income, he calculated the variants 2000 euros, 4000 euros and 6000 euros. With 6000 euros you are close to the contribution ceiling for unemployment insurance. Short-time working benefits are only paid on wages and salaries up to this limit.

Highest rates for high earners

According to his calculations, the replacement rates for the highest income group are highest. Married children with a gross monthly income of 6,000 euros and a partner who earns the same amount get a replacement rate of 81 percent for one month of short-time work. At six months it is still 79 percent.

The replacement rates for low earners are lowest. Lone earners with children with a gross monthly income of 2,000 euros are only compensated for the standard rate of 67 percent of the loss of net wages regardless of the duration of short-time work, since they do not have any favorable tax effects.

Low-income single people without a child receive a similar high compensation rate, even though their standard rate is only 60 percent.

The rates are lower for half short-time work

If the work volume is not reduced to zero, but to 50 percent, for example, the increase in the effective replacement rate due to tax effects is less pronounced. According to preliminary calculations by Jarass, which are to be included in another article, the annual net income of short-time workers who are 50 percent short-time working for six months is 300 to 900 euros lower than for those who are zero for short-time working for three months. Again, the higher the replacement income, the higher the income.

In his essay in the business consultant, Jarass points out that employees will generally not see whether and how much their short-time work loss in the annual tax return will be less than it initially appears.

Because for most, advertising costs and other effects lead to tax refunds or additional payments, which are offset against the reimbursements caused by the progression effects of short-time work.

More: 77 percent of metalworkers are on short-time work – IAB expects more unemployment. Read more here.


Car makers are becoming even more dependent on China

Nobody can yet estimate the damage caused by the corona crisis. The VW group is already calling for purchase premiums for new cars, flanked by unions and those prime ministers who are concerned about the well-being of the key industry in their country. Those who are in short-time work and fear for their job will probably not buy a car for the time being.

The loss of production and sales weighs heavily. Now the corporations face a second problem. There are billions of leasing and loan contracts on the balance sheets of the German auto industry, which come under pressure as the crisis grows. Daimler alone had to spend 400 million euros in risk provisioning for the possibly bursting financing this quarter. If things go badly, then we see the tip of an iceberg here.

Almost every second car that automakers sell is financed, mostly by the company’s own banks. This makes the auto industry a key component of the global debt economy, especially in the United States. Nowhere else is more pumped up than in the country of seemingly unlimited credit options.

Americans don’t save on a car, they sign a lease that is paid at the end of the month from current income. Unlike in Europe, manufacturers generally also assume the residual value risk if the car is resold at the end of the lease term.

In the past ten years, thanks to low interest rates, this has been good business. The car companies financed a car for the consumer and enjoyed a well-calculated cash flow each month. For many customers, a small car became an SUV. So not only ford, Toyota and GM increased their sales but also Daimler, BMW and the VW group.

Faster crash than in the financial crisis

At the end of 2019, the credit volume for car purchases rose to $ 1.3 trillion, which is the same as before the financial crisis in 2008. But as long as the labor market worked and borrowers and lessees were able to stutter their rates, things turned this wheel faster and faster. This is now over for many people. Since the outbreak of the corona crisis, 26 million Americans have registered as unemployed – a faster and deeper crash than in the financial crisis a decade ago.

If these people don’t find work again soon, the auto industry will be hit twice. In addition to the broken credit agreements, the automakers then remain on the used cars, which their customers are placing in ever increasing numbers on the yard. At BMW, the memories of the last burst bubble are still painful. In the financial crisis, the group had to write down around two billion euros on loan defaults and lease returns on the US market. How carefully the corporations calculated this time is open.

While the credit-financed US market threatens to collapse like a house of cards, China shines all the brighter. The giant empire has replaced the USA as the world’s largest sales market in the past ten years. The fact that the corona crisis is over for the time being in the Far East is making some car managers sleep better. The Chinese market has already almost reached the old level again. And unlike most Americans, the Chinese largely pay for their cars in cash.

If the credit bubble bursts in the United States, the market there will remain on the ground for a long time. This does not apply to China. In the shutdown of the past few weeks, the German auto industry has continued to run its component factories in Germany in order to supply parts to the factories in China. When VW, Daimler and BMW build cars again in their German factories, some of them go straight to the Far East.

And the US factories of the Germans are also supposed to start producing again because the mass of the off-road vehicles built there is shipped straight to Shanghai and Beijing.

Crises shift forces. Even before Corona, business in China was very lucrative for the auto industry, also because foreign automakers are increasingly relieved of the obligation to work in joint ventures with a Chinese partner.

With BMW, the majority takeover has already been approved for the first car company. Daimler and the VW group want to follow suit today rather than tomorrow and increase their production in the Far East. That will now accelerate. The industry will mainly collect car keys on the US market in the coming months, but cash in China.

More: Daimler suffers a sharp drop in profits due to the corona crisis.


Unemployment in Italy and the USA increases dramatically

Closed business in the United States

Since the start of the corona crisis, over 26 million US workers have registered as unemployed.

(Photo: AP)

Rome, Washington Not only in Germany, but also in the United States and Italy, the dramatic consequences of corona-related restrictions on the labor market are becoming increasingly important. The United States saw another surge in unemployment claims last week.

According to figures released by the U.S. Department of Labor on Thursday, between April 11 and April 18, 4.4 million citizens applied for unemployment benefits. That is slightly less than the previous week, when 5.2 million applications were received. Overall, however, the historic downturn in the US labor market continues.

Until the start of the corona lockdown in mid-March, the US was practically fully employed. Since then, 26.5 million US workers have registered as unemployed. That corresponds to about ten percent of all workers there.

The unemployment rate for April, which will only be released in the United States on May 8, is estimated by experts to be around 15 percent. The Oxford Economics research institute calculates that the corona pandemic in the United States will lose a total of just under 28 million jobs. For comparison: The recession after the financial crisis in 2008 only destroyed about nine million jobs in the United States.

Registration for unemployment benefits in the United States is also likely to be particularly high because the US government has expanded claims to support in response to the corona shock.

American unemployed people now receive a fixed flat-rate payment of $ 600 a week from the federal budget, in addition to the unemployment benefit of a few hundred dollars a month, which varies from state to state.

For some low-skilled workers, government support is higher than their previous salary. For the first time, solo self-employed persons from the so-called gig economy are entitled to unemployment benefits.

This means that more redundant workers than before have an incentive to actually register as unemployed. However, those who quit on their own initiative or fly out due to their behavior generally have no claim to unemployment benefits in the United States.

Situation in Italy

In Italy, fear of corona-related unemployment is now almost as great as that of the virus itself. According to a survey conducted by the Tecnè research institute on Tuesday, 54 percent of Italians are afraid of losing their jobs, including civil servants . Meanwhile, 62 percent of the population fear the corona virus.

In Italy, not only is the number of corona deaths still highest in Europe, the economic consequences of the crisis are also the most dramatic. With only a few exceptions, production in the country already stops in the fifth week. There will only be easing from May 4. The International Monetary Fund therefore expects Italian economic output to decline by 9.1 percent in 2020.

In its “Global Outlook” for Italy, the rating agency Fitch estimates that the unemployment rate, which was ten percent in 2019, will rise to 12.1 percent this year and will only decrease slightly to 11.8 percent by the end of 2021.

The Italian statistics office Istat only published the unemployment rate for February at the beginning of April, a decrease to 9.7 percent was reported. But that was before the escalation of the Corona pandemic in Italy. It is only at the beginning of May that the March figures will show the true extent of the corona crisis on the labor market.

More: How are different countries and systems doing in the corona crisis? While European countries are at the top, China and the USA are lagging behind.


Almost a fifth of the companies want to cut jobs

Berlin Daimler– HR Director Wilfried Porth didn’t gloss over anything: “Obviously something is breaking away at the moment that no one knows if it can be caught up,” the manager said last week. The carmaker had to accept a drop in profits of almost 80 percent in the first quarter, sales of the core brand Mercedes decreased by 15 percent. “The fact that we will need to adjust is obvious,” said Porth. He didn’t say the word job cuts. But even before Corona, Daimler had decided to cut up to 15,000 jobs.

The fear of jobs is back in Germany and the virus pandemic will leave deep marks on the job market. Every second company is already doing short-time work. According to a survey by the Ifo Institute, almost a fifth of the companies want to lay off employees or not to extend temporary jobs.

“The fear of jobs seeps in,” says Ifo economist Klaus Wohlrabe. The job cuts plans are apparently based on the concern of many companies that the restrictions on public life in the corona crisis will not end in May.

On average, the companies surveyed expected four months of partial standstill. 84 percent feel a drop in sales due to the corona crisis, only four percent register a growing business. According to the Federal Employment Agency (BA), almost every third of the 2.2 million companies with at least one employee who is subject to social security contributions have registered short-time work.

Previous employment forecasts are becoming more and more waste every day that the corona crisis continues. “For the labor market, we expect unemployment to rise sharply over the next few months. But many companies keep their people, you can see that from short-time work, ”says Enzo Weber from the Institute for Labor Market and Vocational Research (IAB).

BA boss Detlef Scheele expected a rise in unemployment by 150,000 to 200,000 people in April a month ago. The Nuremberg authorities will present the current data next Thursday.

Domestic demand collapses

There is hardly any improvement in sight if you look at the economic development: the purchasing manager index of IHS Markit has plummeted. In the survey, 75 percent of service providers and almost as many industrial managers said that their sales had shrunk significantly. Service providers’ sales fell more than ever in the 20-year history of this survey. “Both domestic and export demand has collapsed,” writes IHS Markit economist Phil Smith.

“Demand levels will not return to pre-crisis levels anytime soon,” says Sascha Haghani, head of the global restructuring practice at management consultancy Roland Berger. That’s about it GfKConsumer barometer, which measures consumer mood, plummeted to a record low.

“Sooner or later the companies will have to adjust their costs accordingly,” Haghani expects. Probably also through job cuts: According to the IHS, more jobs were cut in the service sector than at the height of the financial crisis recession in April 2009, and the reduction in personnel is also accelerating in industry.


The Ifo survey also shows how wide the shock waves are spreading in the economy: in industry and service providers, almost every fifth company wants to lay off employees or not to extend temporary jobs. It is 15 percent in retail, and two percent on construction that has so far been little affected by downtime. Leading economists such as the head of business practices, Lars Feld, are starting to adjust their forecasts for 2020 downwards.

After Chancellor Angela Merkel and the Prime Ministers decided a slow restart of the economy last week, he expects gross domestic product (GDP) to shrink by at least 5.5 percentage points in 2020. Even in the economic institutes, which predicted a minus of 4.2 percent for 2020 in their joint forecast two weeks ago, it is now expected that a five will be before the decimal point.

The IAB had anticipated a 4.7 percent decline in GDP in March, when the economy largely stands still for two and a half months and only normalizes by the end of the year. In this case, the number of unemployed could temporarily rise from the current 2.3 million to more than three million, the Nuremberg researchers predicted at the time.

A well-known restructuring expert expects Corona to increase unemployment to as many as four million people. Especially badly hit sectors such as tourism and gastronomy are affected, but also important branches of industry such as the automotive suppliers.

The government is obviously also assuming a long period of weakness on the labor market. For example, for all unemployed people who would slide into Hartz IV between May and December, the duration of the unemployment benefit will be extended by three months. “Those who are just becoming unemployed or who have recently become unemployed currently have little chance of finding a job again,” said Labor Minister Hubertus Heil (SPD).

In order to counter the allegations made by the unions, in particular, that politicians are more concerned with companies than with employees, the coalition committee also decided on Thursday night to increase the short-time work allowance – staggered according to the duration of benefits.

It is currently 60 percent of net income and 67 percent for employees with children. From the fourth month in Corona short-time work, employees whose working hours are reduced by at least half are now to receive 70 or 77 percent. From the seventh month, the rates increase to 80 to 87 percent.

In addition, short-time workers who take up another job can earn up to the amount of their previous monthly income. So far, this was only true for “systemically relevant” activities such as care or agriculture.


The gradual increase in short-time work benefits has met with criticism: “I would have preferred a faster increase, especially for low-wage earners,” said Sebastian Dullien, head of the Institute for Macroeconomics and Business Cycle Research (IMK). In a survey, 40 percent of employees who were on short-time work said that they would get by with the money for a maximum of three months.

Employers see “contribution club”

The decision met with a mixed response among the unions, which had hoped for a general increase to 80 or 87 percent from the start. “This protects many employees from existential hardships,” praised IG Metall boss Jörg Hofmann. On the other hand, the chairman of the Food, Beverage and Catering trade union (NGG), Guido Zeitler, declared that the increase was correct, but was too small and too late.

In the hospitality industry, employees could probably only expect 80 percent of normal net wages in October 2020. According to the NGG calculations, according to the new plans, a cook in Berlin will have around 1,070 euros instead of around 920 euros and short-time work from around 1,220 euros from the seventh month. “For hundreds of thousands of people with low incomes, the only thing left to do is to apply for Hartz IV,” said Zeitler.

IAB labor market expert Weber also criticizes the fact that the planned changes will not benefit employees in the low-wage industries in a very targeted manner. “In the end, industrial sectors that have long been in recession could benefit in particular.”

For Holger Schäfer from the employers’ institute of the German economy (IW), it is not at all clear which problem the government wants to solve with the compromise: “In the end, a lot of money is spent on a purpose that is not clearly defined.” According to Schäfer’s calculations, the BA would need 24 billion euros to send 4.5 million full-time average earners without children on short-time work for three months. The employment agency’s reserve is just under 26 billion euros.

The criticism from business was correspondingly harsh. Employer President Ingo Kramer praised coalition decisions such as help for restaurants and the easier return of losses for companies. But they would be overlaid by “spending money with a watering can”.

The employers’ association Gesamtmetall criticized that the decisions on short-time work were expensive and caused an enormous additional administrative effort at the BA: “There is great concern that when the economy restarts, the tax and contribution club will fall on the employees and companies,” said CEO Oliver Zander the Handelsblatt. BA boss Scheele said that he would have liked a “simpler regulation”.

Monika Schnitzer, a new member of the Council of Experts, told Handelsblatt that she could understand that the government wanted to expand short-time work benefits. “But I think the chosen way of increasing is problematic.” After all, many employers voluntarily increased to keep their employees. I am afraid that it will have a high share of deadweight effects. ”

Ifo President Clemens Fuest believes the decisions will stabilize consumer demand. They are therefore also “a suitable economic policy measure”. The same applies to the extension of the period of unemployment benefit

More: Tax cuts, premiums, aid: Germany’s economists argue about state aid


Daimler posted a drop in profits of almost 80 percent in the first quarter


The carmaker has shut down its production for almost four weeks.

(Photo: Reuters)

Stuttgart The car maker Daimler has to accept a significant drop in profits due to the corona virus pandemic. In the first three months, the Group’s adjusted operating profit (EBIT) dropped to 719 million euros after 2.31 billion euros in the first quarter of 2019, as Daimler announced on the night of Thursday based on preliminary figures. Of the DaxCorporation expects to see losses throughout 2020 as well.

The effects of the corona pandemic on customer demand, supply chains and vehicle production could not be estimated in detail and on a safe basis, making it difficult to make a forecast for the current 2020 financial year. Regardless of this, it is assumed that the sales and turnover of the group in 2020 will be below the level of the previous year. In view of the expected market development and assessment of the business areas, the Group EBIT will also be lower.

Daimler is financially well positioned to start again after the corona crisis: “Given the fact that we have taken comprehensive measures to protect our cash reserves and increased our financial flexibility, we are confident that we will be well positioned for the period during and after the crisis his.”

Since Monday, after four weeks of downtime, Daimler has been ramping up its plants in large parts of its production. Short-time work has also been in effect since April 6, which, according to the current status, should only end at the end of April. Around 80 percent of the approximately 170,000 employees in Germany are affected to different degrees.

Daimler also justified the production stop with the worldwide decline in demand due to the corona virus crisis. From its core brand Mercedes Benz According to information from the beginning of April, the group sold around 477,400 cars worldwide in the first quarter, almost 15 percent less than in the same period last year. Vans sales declined to the same extent. At Daimler, the savings program of CEO Ola Källenius should actually pick up speed.

Daimler plans to publish the full quarterly figures on April 29.

More: VW subsidiary Traton’s profit falls by two thirds.


Hubertus Heil does not want to become candidate for chancellor of the SPD

Hubertus Heil

The SPD politician does not want to be the top candidate of his party.

(Photo: AFP)

Osnabruck Federal Minister of Labor Hubertus Heil does not want to run for the SPD for the chancellorship. Heil told the Neue Osnabrücker Zeitung (Wednesday) that he had no ambitions to apply for the office. At the same time, he praised the work of his party colleague Olaf Scholz: “Basically, Olaf Scholz does an excellent job. I experience that every day. ”The question currently is who the SPD will send to the Bundestag election next year, but“ not in the foreground, ”said Heil.

Salvation had been brought into play by former chancellor Gerhard Schröder among others as a possible candidate for chancellor for the SPD. Among other things, Schröder also mentioned Scholz as a possible candidate.

According to the “Insa opinion trend” for the “Bild” newspaper (Tuesday), the SPD is currently 15 percent. It would be in third place behind Union (38.5 percent) and Greens (16 percent). The Grand Coalition of Union and SPD as well as a black-green alliance would have a majority.

More: Federal Minister of Labor Hubertus Heil campaigns for an increase in short-time benefits.


IW expects housing prices to fall due to the corona crisis

Apartments in Berlin

According to the IW, housing prices could fall due to the corona crisis.

(Photo: dpa)

Frankfurt According to a study by the German Economic Institute, the prices for apartments in Germany could fall due to the corona crisis. “Based on possible bankruptcies and increased unemployment, future rent expectations should be reduced because households have less income overall,” wrote study author Michael Voigtländer.

“This could tend to have a negative impact on house prices.” Uncertainty is also growing, which is affecting purchase prices. The “Welt am Sonntag” had previously reported.

The more the economy slumps, the more prices are likely to fall. Sharply falling interest rates, in turn, slowed the price decline, IW real estate expert Voigtländer said on Monday. This would make real estate more attractive than other forms of investment.

Voigtländer expects interest rates to continue falling in the long term, as households are likely to save more for fear of the crisis and the relaxed monetary policy of the European Central Bank should further depress interest rates.

“The residential property market will come through the current crisis relatively well,” believes the economist. He expects prices to fall between zero and twelve percent this year.

However, there may be regional differences. With the often expensive real estate in southern Germany, there should be “more faults” because the car industry there is particularly badly affected by short-time work in the Corona crisis.

The demand for micro-apartments and luxury apartments is also likely to decrease, as they are often used by foreign specialists.

The IW hardly anticipates a decline in rents. Rents often stagnated in a crisis, as experience from earlier times showed. Owners would rather accept vacancy rates for apartments than lower rent.

More: The corona shock becomes a stress test for coworking.


“Make sure that Europe doesn’t fly apart”

Brussels EU Commissioner Nicolas Schmit, responsible for jobs and social policy, is calling for more financial solidarity with EU countries like Italy, which have been hit hard by the corona crisis. “It cannot be that some countries come out of the recession somewhat unscathed and others get stuck in misery,” the Luxembourger warned in an interview with the Handelsblatt. “Otherwise the populists will get a boost again. We have to make sure that Europe doesn’t fly apart. ”

Countries such as Germany or the Netherlands would also be interested in this, Schmit emphasized: “Look at which countries export to where and where the surpluses arise”. Large investment projects are needed to find a way out of the crisis together. Schmit said that several countries were already interested in the EU loans to finance short-time work benefits (SURE) proposed by the Commission, and not just from southern Europe.

By the end of 2020 or early 2021, Schmit plans to submit proposals for European unemployment reinsurance: “It could amount to a fund that the states would then fall back on,” he said. In Germany, the CDU / CSU have so far strictly rejected the project. Schmit also wants to adhere to a European framework for national minimum wages: “We will certainly not get out of the recession and say that the social must be put behind the economic”.

Read the full interview here:

Commissioner, the pandemic is causing a deep recession. Will we see horrendous unemployment figures in Europe as we did during the financial crisis?
The European economy is at a standstill, which of course has consequences for the job market. In many countries, we have the option of cushioning this through short-time work. But the risk is very concrete that we will again get unemployment rates of more than ten percent in some countries. Young people in particular will be among the first victims because they are either looking for their first jobs or, as in Spain, are often in precarious employment. We must at least prevent them from falling into long-term unemployment again.

This cannot be prevented with short-time work benefits alone.
No, but it is an important way to dampen the explosion of unemployment. We have to secure an income for people and we have to keep companies alive.

The Commission has proposed reinsurance called SURE so that EU countries can finance the short-time working allowance paid through low-interest loans from the EU. When will the new funds be available?
I appeal to the finance ministers to adopt SURE in the next few weeks. We have millions of people in Europe who are on short-time work. That is why we need the instrument quickly to support the countries in the crisis. I also get requests from countries that want to use this tool.

Are these mainly southern European countries?
Not only. There are also countries in Central Europe that are interested, including large ones.

Do you mean Poland?
I will not give names.

How will the Commission grant the loans – and on what terms?
A government says how many people it has in its short-time working system, how many billions it costs, and how much it wants a loan for it. We then examine the application and, in coordination with the EU finance ministers, determine the amount, duration and interest rate. The exact amount depends on the conditions under which the Commission takes out the loans on the financial markets and then passes them on to the country. This cannot simply be written in a regulation.

The member states are to guarantee 25 percent of these loans. So do they have to step in if a country cannot repay the money?
I think that’s more hypothetical. If a member state does not repay this loan, it will also not pay many other loans – then we are in a completely different scenario.

However, some countries such as the Netherlands still object and insist that the SURE program be limited.
I hope that the instrument will be limited in time – if we are out of the crisis, we will no longer need short-time work to the same extent. The size of the pot is also limited to 100 billion euros. But it doesn’t make sense to set a limit of six months or one year in the regulation now – no one knows how long this recession will last. I think some countries fear that this crisis instrument will create a permanent system.

Permanent unemployment reinsurance is also part of the program of Commission President Ursula von der Leyen – even if there is much resistance to it in the European People’s Party. Should the current emergency program later be part of this permanent solution?
I do not believe that. There are already big differences between the SURE program and a permanent system, as suggested by Federal Finance Minister Olaf Scholz. The point is to stabilize a country that will be hit by an asymmetric shock – for example, by a crisis in a certain economic sector. Today, however, more or less all countries are in crisis.

What could unemployment reinsurance look like?
One thing is clear: there will be no European unemployment benefit paid out by the EU. Rather, the states should build up common reserves so that individual countries do not have to cut unemployment benefits massively during an economic shock. This is social, but it also makes sense as a macroeconomic stabilizer.

So it boils down to a fund solution like the one in the USA?
It could amount to a fund that the states would then use. This would also correspond to the suggestions of others, such as the German finance minister. But I don’t want to go into details right now because we focused on the SURE program. Hopefully we will present our proposals late this year or early next year.

Are you also sticking to the plans to introduce a European minimum wage framework?
We will certainly not get out of the recession and say that the social must be put behind the economic. This crisis shows how important investments in the social sector and in fair wages are.

Are you referring to the often poorly paid nurses or cashiers who keep the store going in the pandemic?
All countries should think about how big the wage gap should be. The Commission has no direct powers here, but we could comment on this in our general recommendations.

But will you propose a European legal framework for minimum wages?
We have not yet decided what form it will take. We will first consult the social partners again and then make suggestions.

So it has not yet been decided whether there should be a statutory lower wage limit, which is a certain percentage of the median income in the respective country, or whether it remains with a recommendation?
Various factors will have to be considered. If you take just one indicator, around 60 percent of median income, countries with very low wage structures would have no problem. So we have to bring together various indicators to achieve wage convergence in Europe. At present, the differences in wages are significantly larger than the differences in productivity.

French President Macron warns that without financial solidarity with countries like Italy, the EU will fail as a political project and populists will come to power. Would you agree with that?
We have to make sure that Europe doesn’t fly apart. It cannot be that some countries will come out of the recession somewhat unscathed and others will get stuck in misery. We will not find our way out of the crisis if everyone tries to play their own game. We depend too much on each other for that. There will be a lot of changes in the world too, so we need a strong European single market. It only works together, only in solidarity.

So you appeal to reserved states like the Netherlands or Germany to do more financial solidarity?
Solidarity is not a one-way street. Take a look at which countries export to where and where the surpluses arise. We need solidarity, of course not blindly and free of charge, and we need the major investment projects that the President of the Commission has mentioned. Otherwise the populists will get a boost again.
Commissioner, thank you very much for the interview.

More: The EU wants to strengthen the economy with a corona fund of up to 1.5 trillion euros. In an interview, EU Vice-President Dombrovskis explains how the Commission intends to finance it.


Daimler starts production again

Stuttgart After four weeks of stoppage in large parts of the production, the carmaker is driving Daimler his works up again from this Monday. One focus is on drive and transmission technology, an area that is not only dependent on the other plants in Germany, but also abroad and especially in China. While some locations begin with one shift, others are supposed to work in two or three shifts again, as Wilfried Porth, Chief Human Resources Officer, and General Works Council Chairman Michael Brecht said.

“We are still significantly reduced in terms of production,” said Porth. The supply chains had generally held up and the start in China, which had been going on for a few weeks, had worked well. “We have even bigger issues in Europe in Italy, France is also extremely restricted,” said Porth. However, the attempts now planned are secured.

The work is to be carried out under strict hygiene requirements, which the Group and the works council would have drawn up based on hazard assessments for each workplace. “The catalog that emerged from this is in principle the catalog that was incorporated as a basis in the recommendation of the (industry association) VDA and in the end also in the considerations of the federal government,” said Porth. “We did a lot of preparatory work there.”

To ensure that the employees have no more contact with each other than necessary, the shifts are not fully occupied and the shift times are changed so that the employees meet neither at the factory gate nor in the changing rooms. Where possible, work should continue from the home office. “We always said: If we start again, the risk of infection should be lower for us than outside the company,” said Brecht.

Handelsblatt Morning Briefing - Corona Spezial

Daimler had shut down a large part of its production in March, and since April 6, short-time work has also been in force, which, according to the current status, is only due to expire at the end of April. Around 80 percent of the approximately 170,000 employees in Germany are affected to different degrees.

Källenius: CO2-neutral cars by 2039

When Daimler could bring production back to the pre-crisis level is unclear. “We still don’t know how the market will react,” said Brecht. You are currently driving completely on sight and decide from week to week how to proceed.

Both emphasized that the economic consequences of the corona crisis would also not be foreseeable. “Obviously something is breaking away at the moment that no one knows if it’s catchable,” said Porth.

However, if demand levels off below what the Group has based on its planning, it is also clear that the previous savings targets and the planned job cuts are not sufficient. “The fact that we will need to adjust is obvious,” said Porth. You then have to see how this is implemented.

Despite the unpredictable consequences of the crisis, Daimler CEO Ola Källenius is sticking to the previous CO2 targets, even if you have to “take a lot of money into your hands”. “Success in decarbonization determines the future of our planet,” writes Källenius in a guest post for FAS. His goal for Mercedes-Benz is a CO2-neutral car fleet in 2039. By then, “all new Daimler commercial vehicles in use should be CO2-neutral”. The group is pushing ahead with the electrification of its vehicles even during the corona crisis.

As a possible financing instrument, Källenius suggests “for example green bonds”. “Environmentally conscious investors” would thus have the opportunity to directly participate in the Group’s sustainability project, writes the Daimler boss.

More: Daimler wants to produce up to 140,000 protective masks every day.