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.”

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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.

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Economy warns of exaggeration in the fight against Corona

Dusseldorf The Chairman of the Council of Experts, Lars Feld, urges the Federal Government to take measures to fight the corona crisis. “Above all, what is currently being discussed is problematic. You get the impression that every industry wants specific support, ”Feld told the Handelsblatt.

The hospitality industry wants the reduced VAT rate that has now been decided. The auto industry is again asking for a scrappage premium, and retailing vouchers, says Feld. “You could go on almost any way – who doesn’t have one yet, who wants to do it again.”

“If you go this route, you will hardly be able to catch it afterwards in terms of fiscal policy,” warns the head of the Freiburg Walter Eucken Institute. This applies “also to social policy measures such as the increase in short-time work benefits or the extension of the duration of unemployment benefits”. “I’m more worried about whether we will be able to return to normal economic policy,” says Feld.

The economist also disapproves of the federal government’s policy on industrial policy: “If Corona is now used to quietly implement questionable industrial policy goals, I find that unacceptable.”

Specifically, it refers to the recent tightening of the Foreign Trade and Payments Act. “The goal of building a fortress Europe is definitely the wrong way to go,” said Feld. Germany in particular, as the largest economy, must speak out for openness. “We cannot leave the Dutch alone to stand up for a market economy policy,” he warns.

He expressly warns against the introduction of a property tax. “To talk about a property tax in this situation is insane. The best way to pay off the debt is with an intelligent growth strategy, ”said Feld.

Read the full interview here:

Mr. Feld, you are considered the nation’s regulatory conscience. The state experiences something of self-empowerment in corona times. What scares you more: the virus or the political measures against it?
“Fear” is the wrong expression in both respects. I know the medical problems abstractly, but I don’t feel any threat. Of course, this can change quickly if I experience illnesses in my personal environment. This is often the case. As far as the state measures in the fight against the crisis are concerned, I am not afraid either, I am more concerned that we will be able to return to normal economic policy.

The state intervenes massively in contract law, it relaxes bankruptcy law, it communitises risks. In your opinion, is that all still proportionate?
Overall, I think the aid package is proportionate. You can argue about individual measures, especially with tenancy law. However, one has to say that the state there has been massively interfering with freedom of contract for a long time: through the rent brake or the rent cover in Berlin, which is probably unconstitutional. I criticized that before Corona – and I’m also criticizing it now.

So you don’t see a new quality of state intervention?
But, above all, what is currently being discussed is problematic. One has the impression that each branch wants specific support. The hospitality industry wants the reduced VAT rate that has now been decided. The auto industry is again asking for a scrappage premium, and retailers are demanding consumer vouchers. This could be continued almost indefinitely: Who has not yet, who wants again?

If you go this route, you will hardly be able to catch it afterwards in terms of fiscal policy. Ultimately, this also applies to social policy measures such as raising short-time working benefits or extending the duration of unemployment benefits.

The current bailout package is well over a trillion euros, i.e. more than three times the federal budget – these are sums that recently seemed unthinkable. Will the state’s calculation work, so now to save jobs, will it cost what it wants? Otherwise, the state would have to pay for the millions of unemployed anyway …
Yes, the sums are big. However, many simply add up everything that is put in the shop window – loans, grants, guarantees and guarantees. You have to take into account that not everything has an impact on expenditure, loans are repaid and guarantees are not drawn. The decisive factor is whether the measures are targeted.

Where do you see the debt ratio in the medium term?
By the end of 2021, we will probably be back to around 80 percent of economic output, roughly the level we had at the end of the financial crisis.

Do you think politics and science still have an overview? When was it that the state had to keep thousands of companies alive – and probably for months?
I don’t think the state will be able to maintain this for months. It can mitigate the consequences, but it will not be able to save all companies and jobs. We will have bankruptcies. Ultimately, it’s about helping companies that have a viable business model over this cliff. It should not be forgotten that companies are in this situation because the state massively restricts our freedoms during the pandemic. If there were a claim for compensation from the state, the whole thing would be more expensive.

Who pays the bill in the end? There is already debate about balancing the burden …
There is, of course, this debate, but it is a harmful one, with a particular focus on the ideological interests of the parties. To talk about a wealth tax in this situation is insane. The best way to pay off your debt is to use a smart growth strategy.

What do you think of the fact that the private banks are now providing KfW loans with a volume of up to 800.000 euros no longer have to assume any liability, so get a 100 percent guarantee from the state?
If you bear in mind the Federal Government’s goal of mitigating corona-related defaults with liquidity aid, that makes perfect sense. Of course, it is cleaner from a regulatory perspective to take the banks at risk. But then the measure would not work. Even with a liability of only ten percent, banks are very hesitant to grant loans in this difficult situation. Of course, we cannot grant such KfW loans on a permanent basis.

We cannot leave the Dutch alone to stand up for a market economy policy.

But isn’t that a disguised bank bailout program?
I would not say that. It dissolves the risk aversion of privately liable bank executives. Ultimately, credit-based liquidity support is hardly an option for many companies currently affected, provided they would become excessively in debt.

Another instrument that is often mentioned is government participation. Will it happen?
I cannot imagine that we can do without state participation in certain industries – for example, with airlines. Until the Lufthansa back to pre-crisis levels, it may take a long time. The decisive factor is whether they are silent participations or whether the state wants to exercise control rights. I prefer the former because with a stock package it usually takes longer for the state to withdraw.

The bank bailouts during the financial crisis in the USA are always considered exemplary, although there were equity investments …
Yes, that’s right, but the state quickly withdrew there. The following applies: If the control function, then please use the exit scenario.

They probably refer to Commerzbank, where the state is still involved after more than ten years.
Yes, it would be even more serious with massive industrial holdings like we used to have.

Now there was a trend towards industrial policy even before the corona crisis. The economics minister tightened the foreign trade law – and added again during the corona crisis: are we experiencing a turnaround?
Unfortunately, there is a turnaround. If Corona is now being used to quietly push through questionable industrial policy goals, I find it unacceptable.

Now this policy is being carried out by the CDU-led Ministry of Economic Affairs. Are we threatened by French conditions?
The goal of building a fortress Europe is definitely the wrong way to go. Germany in particular, as the largest economy, must speak out for openness. We cannot leave the Dutch alone to stand up for a market economy policy.

Isn’t there a good reason to protect some industries – when it comes to security, for example in the case of the Chinese network supplier Huawei?
Of course, the state has to look when a state investor from China is investing in critical infrastructure. But now that doesn’t just apply to China. American investors are now being looked at just as critically. A systematic foreclosure strategy threatens. What is considered “safety-relevant” must therefore be clearly defined.

The law speaks of an “expected impairment” of public order or security. There seem to be no limits to arbitrariness, right?
The Ministry of Economy is now keeping everything open to prevent any takeovers. The whole thing is also enriched with a participation facility and the economic stabilization fund. It is a very unfortunate combination.

Even mouth protection and protective clothing are considered to be safety-relevant. They may be relevant to health, but they do not have to be produced in Germany. In this case, the state must create strategic reserves.

Back to the economic risks again. If the lockdown has such devastating consequences in Germany, what about countries like Spain and Italy that are already heavily indebted?
There is no way around these countries pursuing an expansionary fiscal policy and driving up debt levels. There is no alternative in the face of this great crisis.

Aid programs such as those in Germany cannot be afforded by these countries, which have been hit much harder by the corona crisis …
I wouldn’t say that in general. Spain and France have enough leeway with a debt ratio of 100 percent. I think 120 percent would be possible without them being in the focus of the financial markets.

Italy, which has a debt ratio of almost 140 percent, financial market players have long had their sights on them. Only thanks to the massive intervention of the ECB has interest rates dropped to a tolerable level again …
Yes, Italy is the real problem. The government debt there is moving towards Greek dimensions in terms of economic performance – and this is about a G7 country.

As far as the corona pandemic is concerned, Italy is not in debt to this crisis. Regulatory policy or not: Do you understand Italy’s prime minister, who vehemently demands the solidarity of the strong countries?
I differentiate between understanding and acceptance. I understand that Italy needs support given the many deaths. And I understand that the Italians are now doing everything they can to protect themselves against possible distortions in the financial markets with external help. What I cannot accept is Premier Conte’s blackmail strategy, which is unique in its sharpness.

Isn’t this attitude due to sheer misery?
That may be the case, but the extortionate approach could end up being counterproductive. The government cannot credibly threaten to exit the euro because the economy would collapse completely.

But the Italians know very well that an exit from Italy would very quickly result in a collapse of the monetary union, which the rest of Europe can hardly afford …
This may be. Nevertheless, Conte’s strategy is questionable because Italy would suffer much more. In Italy, therefore, there is rightly a debate as to whether the prime minister does not overdraw. Italy is well supplied with the funds that have been made available – i.e. the scarcely conditioned loans from the ESM rescue fund with the possibility for the ECB to buy unlimited government bonds (OMT).

I reject joint and several liability. That would be a fall for me.

Italy insists on corona bonds, i.e. the joint borrowing for this crisis. Wouldn’t that be an important symbolic signal for Europe’s cohesion?
No, I’m completely the politician of order. I reject joint and several liability. That would be a fall for me.

But isn’t it the more honest way in the end? A communitization of risks has long been taking place through the ECB’s balance sheet, an institution that is not at all legitimized for such a redistribution policy …
Again, joint and several liability between states is out of the question for me. Other forms of joint liability, such as joint liability or guarantees for debt, can be discussed.

Discussions about a fund at EU level – possibly parallel to the ESM – that is financed by bonds guaranteed by member states and from which transfers are paid – all of this is conceivable. The problem with joint and several liability: Here the creditor can pick out the most solvent country – and force it to be repaid.

The crisis could hit the emerging markets even more severely than Italy. We are obviously experiencing a crisis of a whole new dimension. Not only almost all industries are affected, but also all regions of the world – at the same time. Some already compare the economic consequences with the Great Depression in the 1930s. Do you think this is alarmist?
No, I don’t think it’s alarmist. There are parallels as to the dimension of the economic downturn; but not on the job market. In addition, the reasons are completely different. The current crisis cannot be compared with the Spanish flu either. At that time after the First World War, the economies were very weak.

The fact is: A crisis as we are now experiencing it is unique. It is not only the slump in the economy as a result of the lockdown, but also the interruption of the international supply chains.

How do you explain that the markets are still reacting almost moderately?
The markets are still assuming that the gigantic rescue packages will help to overcome the liquidity problems. Whether this will really be the case depends on the further development of the pandemic. I would therefore not rule out further slumps in the financial markets.

The Ifo Institute anticipates a 20 percent drop in GDP in the worst scenario. Do you think such a scenario is conceivable?
I’m not that pessimistic. The 20 percent of the Ifo Institute is an annual projection, not an annualized quarter. This means that the relatively robust first quarter is included, so that the economy would not get on its feet in the third and fourth quarters.

At the moment, almost all countries except Sweden are pursuing the same corona strategy: lockdown, bans on contacts and so on. There has never been an experiment like this. Could this strategy turn out to be a global mistake in the end?
Afterwards we’ll be smarter. Yes, there are voices that can be taken seriously and say that we unnecessarily stall the economy. Only: If we look at the infection curves and compare them with other flu waves, we see that the rise at Corona is much steeper. If we let it go, significantly more deaths would be unavoidable. So I think trying to flatten the curve so as not to overload the health system is the right strategy.

Finally, a personal question: It was not long ago that your colleague Peter Bofinger from Würzburg was the last Keynesian. But now conservative economists are also calling for massive government intervention. Ifo boss Clemens Fuest, for example, or IW boss Michael Hüther, who most recently spoke in favor of corona bonds. Do you sometimes feel like the last politician in the country?
Do not worry. There are still a large number of economists who think in terms of regulatory policy. In addition, I am just as pragmatic as my colleagues in this unique crisis that we are currently experiencing.

Mr. Feld, thank you very much for the interview.

More: EU summit: These are ideas for financing the EU reconstruction funds

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Corona: Harvard researchers predict “social distancing” by 2022

science Corona pandemic

Harvard researchers predict “social distancing” by 2022

| Reading time: 3 minutes

That is why the weather can be an important ally against the virus

Researchers around the world are looking for new knowledge in the fight against the corona virus. Now US researchers have found something that could help us a lot in the summer.

What is the normality after the corona virus? Harvard University experts believe that social distancing measures will remain important for years to come. They also play through the scenario of sudden easing.

MPeople around the world will need to maintain some degree of social detachment by 2022 to prevent Covid-19 from spreading again and overwhelming health systems. This is the assumption of a group of Harvard researchers around the epidemiologist Edward Goldstein.

The sudden abolition of “social distancing” measures could run the risk of merely delaying the epidemic’s culmination and possibly exacerbating it, the scientists warned in a Tuesday newspaper “Science” published articles. The magazine works on the principle of peer review.

According to the article (“Projecting the transmission dynamics of SARS-CoV-2 through the postpandemic period”) the course of the pandemic will depend on unanswered questions: will the spread of the virus change with the seasons? What immunity will people develop after being infected? And does exposure to coronaviruses that cause mild diseases offer protection against the pathogen that causes Covid-19?

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The Harvard researchers used computer models to simulate how the pandemic could develop. One possibility is that strict social distancing, followed by intensive public health detective work, could detect and eradicate the virus. This was the case with SARS-CoV-1, which caused a worldwide outbreak in 2003. However, given the large number of confirmed cases of the new pathogen, which is approaching the two million mark worldwide, this outcome is considered to be increasingly unlikely, the scientists explain.

Seasonal illness

They are more likely that the virus will persist like that flu and spread seasonally around the globe.

In one of the researchers’ models, an epidemic peak that was as large as in the case of an uncontrolled spread occurred after the end of 20 weeks of measures to limit the spread.

“The social distance was so effective that practically no population immunity was built up,” said the researchers on this scenario. If the virus is transmitted earlier in colder months than in warm months, a delay in peaking into autumn could increase the burden on health systems, they wrote.

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Bill Gates had already warned of a pandemic in 2015

To avoid such consequences, social distancing measures may be necessary again and again until 2022, unless the hospital capacity is increased or effective vaccines or treatments against the novel coronavirus are developed.

Germany is slowly trying to get back to normal

In Germany, the National Academy Leopoldina has just made recommendations for returning to normal. The researchers suggested on Monday that schools should be reopened “as soon as possible”, initially for younger children. Wearing a protective mask for public transport should become a duty, data collection also had to be “substantially” improved with the help of Corona apps.

The 26-person working group, including Leopoldina President Gerald Haug, the economy Lars Feld and the sociologist Armin Nassehi, continues to regard “rapid containment of the spread of the pandemic” as the top priority. Even if the Corona crisis would continue to determine economic and social life for months to come, strategies for the gradual return to normal would have to be developed.

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Coronavirus pathologist

The prerequisites for relaxation are: the new infections stabilize at a low level, the health system is not overloaded, infected people are increasingly identified, the known protective measures are “disciplined”.

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The federal government and the states advise on how to proceed

Berlin The signal for the opening comes from Halle an der Saale. The “National Academy of Sciences Leopoldina” resides in the city in Saxony-Anhalt. The most traditional German scholarly society is the academic anchor of the federal government in the corona crisis.

She advises: “Although the pandemic will continue to determine economic and social life for months to come, it is important to develop criteria and strategies for the gradual return to normality beyond the acute restrictions of fundamental fundamental rights such as freedom of movement.”

Schools should be reopened as soon as possible, albeit initially for certain age groups. Retailers and the hospitality industry could soon start operating again with restrictions.

The Germans should be allowed to travel again in the foreseeable future, on business and privately. In addition, the Leopoldina experts recommend: “Depending on the possible spatial distance and the contact intensity of those involved, social, cultural and sporting events should gradually be made possible again.”

However, a prerequisite for the gradual opening is that hygiene and protection rules are still observed. The requirement to keep your distance in everyday life remains. In addition, “in certain areas such as public transport” it could become mandatory to wear a mouth-nose mask.

Countries have different ideas

The Federal Government’s Corona Cabinet meets on Tuesday. On Wednesday, the federal and state governments will discuss how long the most drastic restrictions on social and economic life in the history of the Federal Republic are to continue.

At their last phone call in early April, Merkel and the prime ministers agreed to extend the strict ban on contact until April 19. Now they could sketch a way out of the standstill and use the Leopoldina’s report as a scientific basis.

However: The countries have different ideas about how quickly the steps into normality should take place. There is also no consensus within the federal government regarding the pace.

Even in pre-Easter times, politicians had made calls to show the population and companies a way out of corona rigidity. The Chancellor disliked this. Merkel feared that the debate might raise false hopes or create a deceptive feeling of security.

The driving force behind the opening faction is Armin Laschet, the Prime Minister of North Rhine-Westphalia. Last week, the CDU politician in the Handelsblatt interview argued for a flexible easing of the lockdown.

At the weekend, he sent the recommendations of his own expert council to Merkel and the other prime ministers, the paper is headed “Ways into Responsible Normality”. The suggestions from NRW read similarly to the concept of the Leopoldina. “One possible way can be to gradually re-allow individual areas of public life,” says the paper that is available to the Handelsblatt.

Schools and shops would have priority, and restaurants could also reopen if the number of guests was limited and table spacing requirements were met. “Major events such as Bundesliga soccer games with spectators, but also trade fairs and congresses will not be possible in the foreseeable future.”

In a cover letter, Laschet asked the country colleagues and the Chancellor to take into account the “transparent and comprehensible criteria” of his experts when advice is given on a gradual lifting of the measures this week.

Söder dampened hopes

However, other prime ministers are not in such a hurry as Laschet, who is applying for the CDU chairmanship and thus the next candidate for chancellor of the Union. Bavaria’s head of government Markus Söder (CSU) dampened hopes that the contact restrictions would be removed shortly.

Söder warned: “Even after the Easter holidays, things will not just go on as before. If you loosen too soon, you risk a relapse. ”Prime Minister of Baden-Württemberg Winfried Kretschmann (Greens) made it clear in the“ Frankfurter Allgemeine Sonntagszeitung ”that the easing of the measures depends on the number of infected people, test capacities, medical personnel and the number of free intensive care beds depend.

And the head of government of Rhineland-Palatinate, Malu Dreyer (SPD), said in an ARD interview rather cautiously: “Of course, you can gradually relax. But they have to be very balanced, and you really have to be able to make it clear that we need a new hygiene offensive. ”

Malu Dreyer

The Rhineland-Palatinate Prime Minister Malu Dreyer (SPD) was cautious about a possible easing.


(Photo: dpa)

In the past few days, Federal Minister of Health Jens Spahn (CDU) in particular has spoken out in the Federal Government for an opening perspective soon. Federal Minister of the Interior Horst Seehofer (CSU), on the other hand, is seen as a supporter of the strategy to contain the spread of the virus for as long as possible by taking tough measures.

Defense minister and CDU chief Annegret Kramp-Karrenbauer warned over the weekend of a patchwork for the normalization of public life in Germany. “It is important that we have rules that are as uniform as possible. Everything else raises additional questions, ”said Kramp-Karrenbauer of the German Press Agency. There was a firm agreement at the Prime Ministers Conference to present a “good overall package” with the Federal Government for a possible opening after the Easter holidays.

And this overall package could be based on the Leopoldina’s report. The Corona Crisis Working Group has 26 professors, including lawyers, sociologists, doctors, educators, philosophers and psychologists. The chairman of the economy, Lars Feld, also worked on the recommendation catalog.

Right from the start, the scientists made it clear that the prerequisite for “gradual relaxation” is that new infections stabilize at a low level and the health system is not overloaded.

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In this way, “necessary clinical reserve capacities would have to be built up”. They are also calling for the corona tests to be expanded and for people with infection to be tracked better using smartphone apps.

The education sector could kick off a return to normality. In this way, teaching could initially be resumed at primary schools and at lower secondary level – i.e. at secondary schools, junior high schools, comprehensive schools and high schools up to tenth grade. In contrast, daycare centers are said to remain largely closed until summer.

The scholars point out that early easing is also required under constitutional law: “Restrictions on fundamental rights must not only pursue a legitimate aim – which is beyond doubt in the current situation with the protection of the life and health of the population”, says the report. The measures taken should also be appropriate. “The unquestionability of the right purpose does not automatically lead to the admissibility of the funds taken.”

The report also contains a number of economic policy recommendations to cushion the consequences of the lockdown. In order to revive the economy in the short term, there must be a number of tax reliefs. The experts also bring the complete abolition of the solidarity surcharge into play. In addition, massive public investments are necessary, for example in the health sector.

After the crisis, however, the measures would have to “be reduced or adjusted as soon as possible in favor of sustainable management within the framework of a free market organization”.

RKI numbers should be used with caution

This includes an end to crisis-related government holdings in companies as well as a reduction in government debt. The debt brake must be maintained.
Germany has so far been spared dramatic conditions in the corona pandemic, such as in Italy or New York.

Spahn had told the Handelsblatt that there was a “positive trend” that had to steady over the Easter days. That seems to be the case: the number of new infections registered by the Robert Koch Institute (RKI) has been declining in recent days. As of Monday, around 123,016 people in Germany were demonstrably infected with the coronavirus, of which more than half have recovered.

So far, 2799 patients have died from a corona infection. However, the official information provided by the RKI should be treated with caution: Not all cases are reported immediately to the Federal Institute by the health authorities.

Because of the incubation period of up to two weeks, the numbers reflect the infection process from the past. And the statistics only record cases that are confirmed in tests. Virologists suspect a high number of unreported cases of people who carry the pathogen but who show no or only very mild symptoms of the disease.

The Leopoldina experts therefore urge urgently to improve the data basis for the political decisions: “The data collection, which has so far been largely symptom-based, leads to a distorted perception of the infection process.”

More: Comment: The prime ministers of the countries vie for the fastest exit. However, caution is required in the scenarios.

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Economic modes fear recession like the financial crisis

Berlin The Economic Advisory Council does not expect a much deeper recession this year than during the financial crisis 2009. “If the shutdown continues for five weeks and then starts to recover within three weeks, the minus will be less than five percent,” said the boss of economic practices, Lars Feld, one of the most likely recession courses in his view. The economies thus counter horror scenarios of other economists.

The Munich Ifo Institute, for example, presented several variants for the course of the recession this year on Monday. According to calculations by the Ifo economists, the losses for the German gross domestic product (GDP) ranged from 7.5 to 20.6 percent this year, depending on the duration of the contact bans. The Kiel Institute for the World Economy (IfW) believes a slump between 4.5 and 9 percent is possible due to the corona pandemic.

Unlike the Ifo, the Council of Experts does not expect that sales in many industries will be lost. “Many restaurants, for example, switch to delivery service,” said Feld. If the shutdown should last seven weeks and the recovery phase five weeks, “we would be roughly in the financial crisis,” said Feld. At that time, gross domestic product had shrunk by 5.7 percent.

The economists and a further 15 top economists had spoken on Tuesday with Federal Minister of Economics Peter Altmaier (CDU) in a video conference about the economic effects of the ban on contacts that have applied since this week.

The group agreed that after the shutdown ended, there had to be a “fiscal spark” for the recovery, such as a reform of corporate taxes. But she also advised on ways to exit the country’s standstill.

High number of tests required

Because the economists in Germany agree that the depth of the recession depends very much on how long the shutdown lasts. “It would therefore be good to take a close look at the other options beyond the blanket contact ban to curb the pandemic,” Feld told Handelsblatt. “It would be good if we could test nationwide in Germany and South Korea and make the tracking of the contacts of infected people compliant with data protection regulations,” said Feld.

Volker Wieland, a business man, also spoke to the Handelsblatt for a large number of tests in order to consistently isolate those infected and to be able to quickly quarantine their contacts. “We must now be able to start up the healthcare system very quickly,” said Wieland. And: “Of course that costs a lot of money, but a shutdown that lasts for many weeks would cost a lot more money.”

In order to gain time for the expansion of the hospitals and to slow the rapid rise in the number of infected people, the blanket contact bans are “absolutely necessary”, said Wieland. He also praised the federal government’s bridging aid for businesses.

The Council of Experts considers the very dramatic recession scenarios to be unlikely, also with regard to statements by scientists from other disciplines, including virologists.

“The Leopoldina working group’s brief statement makes us confident that bans on contact for two to three weeks can significantly reduce the number of infections,” Feld told the Handelsblatt, because: “That would mean that the very strict measures could gradually be relaxed after Easter. “

More: “The ECB’s measures will have the desired effect”: Volker Wieland’s economy on the decisions of the central bank and his recommendation to politicians.

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The struggle for the Council of Experts

Dhe Council of Experts for the Assessment of the Macroeconomic Situation (“Five Wise Men”) has come to the center of a party-political controversy that threatens to damage the still considerable reputation of the committee. After the grand coalition agreed to fill the two vacant positions on the five-member committee with Veronika Grimm and Monika Schnitzer, Federal Finance Minister Olaf Scholz (SPD) blocked the appointment of the two women. At the same time, he wants to regulate the succession of the mandate of long-standing council member Lars Feld, which expires in 2021. Instead of offering a further five-year contract to Feld, who as a market-oriented economist in the SPD is rejected, Scholz would like to see Marcel Fratzscher, President of the German Institute for Economic Research (DIW), on the Expert Council.

Fratzscher always emphasizes that he does not feel committed to any party. That may be so. But many of his economic policy positions have long been popular with the SPD. For example, the economist considers the debt brake to be nonsensical and harmful. He also advocates an extensive government investment program; on the other hand, he is critical of the abolition of the solidarity surcharge. Almost two years ago, he described Germany as “a danger to the European Union”. Fratzscher represents his economic policy demands aggressively, and he has a feel for topics that are of public interest, as well as for catchy wording. Hardly any other German economist is more present in the media than he is – but not every one of his quick media shots hits the target.

Giersch principle should be respected

It is not surprising that a social democratic federal finance minister Fratzscher proposes for the expert council. However, the idea is wrong for several reasons that have nothing to do with the economic policy views of the economist. Rather, there are fundamental objections. So the law prescribes an independence of the experts. Therefore, the Council does not meet at the seat of the federal government, but in the rooms of the Federal Statistical Office in Wiesbaden. In order to preserve the independence of the experts, a principle formulated for a long time by the well-known economist Herbert Giersch applied: since the large economic research institutes are funded to a large extent by the state, an institute director should not also belong to the Expert Council. Giersch stepped down from the Council when he was appointed President of the Institute for the World Economy.

Its website provides information on the DIW’s sources of finance. 60 percent of the funds come from research funding from the federal and state governments. In addition, a large proportion of the money received through contract research and project funding is attributable to public institutions in Germany and abroad. The truth is: Fratzscher would not be the first president of a large institute on the Council. Politicians would do well to respect the old and well-founded Giersch principle again in order to rule out conflicting goals from the outset.

Financial science expertise needed

Fratzscher would also be the wrong choice because it is a good tradition to send at least one highly qualified and respected financial scientist to the Council. Public finance is the study of the economic role of the state; she also deals with the economic analysis of political processes. Especially at a time when the roles of market and state are being questioned again and again, financial science expertise is required in the council.

Contrary to what some of his many opponents claim, Fratzscher is not a scientific lightweight. He has published a number of articles in internationally renowned journals. But he earned his merits as a researching economist primarily in the field of monetary policy and international capital movements, and not in finance, on the subjects of which he frequently speaks. Thankfully, the German-speaking world is not poor in respected finance scientists. With good will, the position could be filled competently again if Feld did not get another mandate.

It is likely that this personnel will be decided in the chancellery. The Chancellor should resist the inclination to give the SPD another peace gift in the long ailing coalition, which would be perceived as an abandonment of the Union’s core brand. Anyone who demands economic competence as a politician must also ensure competence in economic policy advice. If Scholz Fratzscher should withdraw in order to present another candidate with an apparently conciliatory gesture, who did not meet high standards, but liked the SPD, the Chancellor could say no for a second time.

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