The Comptroller General of the Republic stopped the creation of a data observatory promoted by the government in partnership with Amazon Web Services and the Adolfo Ibáñez University (UAI).
Is about “Data Observatory”, an initiative whose purpose is the processing of public data.
The inspection body reported that did not take reason of the constitution of the “Data Observatory Foundation”, led by the Ministry of Economy and the Ministry of Science, since “Does not conform to the law.”
We did not proceed with the creation of a public initiative foundation that sought to acquire, process and store large volumes of data generated by institutions. But why? Here we tell you the 2 main reasons🙂
In a site intended for the proposal it is indicated that it consists of “a public-private non-profit organization” that “seeks to maximize the benefit that we obtain from public data, of global and unique value that are being generated in our country.”
In addition, it indicates that it is proposed “turn Chile into the capital of Data Science or data science“.
Its creation was announced through a presidential decree on December 27, 2018, where it was indicated that the objective is “acquire, process and store data sets generated by public or private institutions and for the development of science and technology, innovation, knowledge and their applications in the economy “.
Among the arguments, Comptroller maintains that A public bidding process was not accredited for the participation of private companies such as Amazon and the UAI.
Due to the foregoing, the body expresses that “the absence of a public proposal without the proper foundation It is of special importance if it is considered that the purpose of the Foundation is the treatment, through multiple operations, of large volumes of data from, among others, public institutions ”.
Along the same lines, it is indicated that by not carrying out said process, the State “It has been important to confer on the individuals involved a significant privilege in relation to third parties that may be in similar or better conditions to enter into the contract in question, violating the equal opportunities that the State must ensure to all persons ”.
Comptroller also states that “The reasons that led to the selection of the Adolfo Ibáñez University are not detailed, especially considering that this institution does not have an educational area of astronomy ”.
Finally, it is alerted that “There are not enough guarantees to protect the correct use by the individuals involved in the data of public entities and that they prevent its commercialization to the detriment of the public patrimony and the equality of opportunities that the State must ensure to the members of the community ”.
The Chancellor is in top form in times of corona crisis. Angela Merkel explains complicated population doubling rates and reproductive numbers. But she also knows everyday things. “They have to be washed or ironed regularly, put in the oven or in the microwave,” Merkel explains how to care for respiratory masks. “Even if that sounds a bit housewife, so to speak.”
The omniscient state – embodied in the chancellor. The subjects are explained life down to the smallest detail. With this self-image, Merkel takes “measures that have never existed in our country before”. Fundamental rights are restricted, the economy is pushed to the brink and then supported with unprecedented aid.
One of Merkel’s closest confidants, Peter Altmaier, is more than enthusiastic. “An uncle who brings something is better than an aunt who plays the piano”, the Federal Minister of Economics remembers of his childhood.
And what is brought along! If you add up everything the federal government now wants to offer to combat the corona crisis, you get a gigantic sum of at least 1.2 trillion euros. No other country in the world has raised so much money in relation to its economic strength.
Germany has a full 35 percent, far more than the EU average or the USA. Federal finance minister Olaf Scholz did not understate what he promised a few weeks ago: “It is not spilled, but padding.”
The increase in importance and power is unique. Never in the history of the Federal Republic has a government intervened so quickly and deeply in public life and thus in the economy. After the financial crisis, German government debt rose by 315 billion euros in one year. The value of the federal, state and local governments will be far exceeded in this crisis. “I am worried whether we will be able to return to normal economic policy,” says Lars Feld, Germany’s top economy.
The measures to protect health are understandable. But the question increasingly arises: what side effects do the multi-billion dollar rescue programs have? The free market is disturbed, competition is distorted, prices lose their signal strength.
“As much market as possible, as much state as necessary”, the famous words of former Federal Minister of Economics Karl Schiller lose their meaning every day.
There is a risk of higher prices, inefficient companies and loss of wealth. It is significant that more and more companies are turning to the Bundeskartellamt during the corona crisis in order to be exempted from cooperating with competitors. The new spirit of state economy speaks.
Spend as much as you can. The year 2020 will be disastrous. Kristalina Georgiewa (IMF chief)
Certainly, help for companies with no fault of their own must be provided. But with the flood of support funds, the risk of misallocation is high. Capital and labor are tied up in companies with below-average productivity, less investment and innovative strength.
A few weeks ago, after a parliamentary request from the FDP for possible support from zombie companies, the Federal Ministry of Finance had to admit that “necessary market processes of creative destruction are hindered”.
The concern is justified that the state is eating itself too deeply into the economy, throwing privacy and data protection partially overboard and that the influence on the market will not be reversed after the end of the crisis.
A look at history suggests little good. The federal government is still 25 years after the IPO Deutsche Telekom still the largest single shareholder.
Fundamentally, there is a problem that is known in the economy as moral hazard: companies and citizens behave irresponsibly or carelessly due to existing false incentives. The news of fraudsters sneaking up subsidies is increasing.
“The state is a lousy entrepreneur”
The appearances of Altmaier and Scholz are characterized by superlatives. At the federal press conference, they will be presenting the rescue packages worth billions to the public with great regularity. “This is the most comprehensive and effective guarantee that there has ever been in a crisis,” said Altmaier in mid-March. “This is the bazooka, we’ll look for small arms later,” the Federal Minister of Finance said at the appearance.
The small arms that have now been added are quite large-caliber. Scholz announced a debt-financed supplementary budget of 156 billion euros. This includes an emergency fund with a volume of 50 billion euros, which is aimed at the self-employed and small businesses with up to ten employees.
The federal guarantee for the state bank KfW is increased by up to 450 billion euros. And then there is an Economic Stabilization Fund (WSF) with a volume of 600 billion euros. The majority is earmarked for government guarantees to keep companies liquid.
100 billion euros are reserved for possible investments, i.e. partial nationalization of companies. The battered Lufthansa is already holding talks about state participation.
You can still hear Altmaier’s words: “The state is a lousy entrepreneur.” The Federal Minister of Economics at least dedicated the most beautiful hall in the ministry to Ludwig Erhard. But he is currently just as far away from Erhard’s mantra as the Germans are from summer leaves in Mallorca.
Minister of Economics Peter Altmaier (standing) and Minister of Finance Olaf Scholz (front)
The father of the “German economic miracle” throbbed to measure, he remembered sentences, the state should not be a player, but an arbitrator in the economy. Now the state is preparing to take over the entire football club.
No other industrial country is helping its economy with such large sums as the Federal Republic. This shows a new evaluation by the International Monetary Fund (IMF). He does not criticize Germany, on the contrary. “Spend as much as you can,” advises IMF chief Kristalina Georgiewa. The economic situation is too depressing.
The Council of Experts is now assuming that the economy will decline by more than 5.5 percent this year. This is the case that was previously treated as a worst-case scenario. The economic downturn would be worse than in the global financial crisis. 725,000 companies have registered financial difficulties and short-time work.
Including: hospitals. Health Minister Jens Spahn ordered them at the beginning of March to postpone all planned operations. For the hospital operator, this means severe revenue losses. More than a third of the intensive care beds are not occupied. With the Hospital Relief Act, the federal government created a regulation to compensate the clinics for the failures. But that’s far from enough.
This is the bazooka, we’ll look at small arms later. Olaf Scholz (Federal Minister of Finance)
Some private organizations have registered short-time work, including the Schön-Klinik group. The head of the German Hospital Society, Gerald Gaß, sees the time for a “careful, gradual resumption of regular care”.
Spahn also said last week that clinics could “gradually return to normal”. “We do not want to keep 40 percent of the intensive care ventilation beds in Germany permanently”, said the minister.
The pressure on the companies is huge, the need for help is great. This year alone, the federal government is raising 156 billion euros in new debt. The federal states are also preparing an extensive flood of money for pumps.
According to a survey by the Handelsblatt newspaper among the 16 state finance ministries, they are currently planning 65 billion euros in new debt to fight the crisis. In addition to the federal government’s huge € 1.2 trillion rescue package, the federal states are also helping their companies and the self-employed. Bavaria alone has launched a fund with 60 billion euros.
The IMF chief not only welcomes the gigantic aid package in Germany, the monetary fund also calls for thorough control. “Keep the bills,” said Georgiewa. Transparency and accountability should not be put off in the face of the crisis. Whether Germany is world champion in this discipline, doubts are increasing.
Risk zombie company
The financial crisis shaped a saying by the former head of central bank in Europe, Mario Draghi: “What ever it takes”. In this crisis, it becomes a “Whatever, take it!” Aid is mostly spent without checking, the money cannot be distributed quickly enough.
According to an overview by the Ministry of Finance and the Ministry of Economics, over 26 billion euros were applied for by KfW Hilfen. Almost 13,000 of the more than 13,200 applications were approved. In other words, almost anyone who wants help gets it, most likely companies that didn’t have a working business model before the pandemic.
This easily creates zombie companies that are only alive because of generous state aid. After all: With the large sums, the KfW steering committee seems to be examining it more closely. So far, around 8.5 billion euros have been approved. So it takes a little longer for the large-volume applications.
In contrast, the self-employed and small businesses with up to ten employees are suspiciously fast. So far, according to the overview of 1.65 million applications, around 1.1 million have been approved and more than nine billion euros paid out. These are not loans, but aid that does not have to be repaid.
“Speed and thoroughness go hand in hand: it is carefully checked who receives the money,” Finance Minister Scholz promised. But is that true? North Rhine-Westphalia and Berlin were even recently forced to suspend immediate payments because large-scale fraudsters wanted to get to the pots.
There are also problems with honest entrepreneurs. In North Rhine-Westphalia, for example, the self-employed and small businesses are always granted the maximum amounts of EUR 9,000 and EUR 15,000 – regardless of need. This practice is not well understood in the Federal Ministry of Economics. Because a flat-rate payment of maximum amounts was actually not intended.
The aid should amount to up to 9,000 euros for companies with up to five employees and up to 15,000 euros for up to ten employees. The emphasis here is on the “up to”. According to the Ministry of Economic Affairs, the actual amount should be based on sales and operating expenses for the next three months. An entrepreneur with zero euros turnover and 1000 euros costs would be entitled to 3000 euros in emergency aid.
But these details were lost somewhere in the confusion between the federal states and the federal states. The up to 50 billion euros are provided by the federal government. Although federal money is at stake, it is up to the federal states how much they scrutinize companies. In Hamburg, for example, a liquidity check is required. Other countries are significantly less strict so that aid can flow as quickly as possible.
In Berlin, more than a billion euros were paid out to solo and small entrepreneurs within days. And the Berlin Senate also admits behind the scenes that surely there are also deadweight effects. Since no examination was carried out, almost everyone received 14,000 euros in a combination of federal and state funds. These include the self-employed, who normally have annual sales that are significantly lower, they say.
Some recipients are now voluntarily repaying the aid for fear of sanctions. But whether a subsequent thorough examination is possible to convince fraudsters is skeptical in financial management.
Dangerous false incentives
The economic nonsense, which is operated partly in the name of Corona, is great. Governments in the federal and state governments are increasingly creating the illusion that they can regulate everything with state trillions. And more and more, government intervention and expansion is creating false incentives in all areas of the economy, which can be revenged bitterly.
Take the housing market as an example: the Federal Minister of Justice, a woman from the SPD, wanted to protect the tenants. The result is a half-baked law that gets small landlords into trouble. The law was so badly made that solvent companies like Adidas or Deichmann used the gaps and simply suspended the rent payments. Only after a storm of indignation did Adidas row back.
Take the example of KfW loans: After the institutes hesitated to pass on the subsidized loans from the Staatsbank KfW to companies because they still had to bear ten percent of the default risk, the state assumed full liability. With the danger that house banks will now be able to provide loans to companies that have long been bankrupt.
The banks don’t care, they are released from any liability, but of course they still make good money from their business. The fool is the taxpayer who has to answer for the defaults.
Example of short-time work: Short-time work allowance is a tried and tested crisis instrument. The state replaces up to 67 percent of net wages. However, the SPD was not enough. In the coalition committee on Wednesday, she pushed for an increase to 80 percent.
It is the most comprehensive and effective guarantee that there has ever been in a crisis. Peter Altmaier (Federal Minister of Economics)
However, a general increase would have significant deadweight effects: Many companies are already increasing short-time benefits from their own resources. Apart from that, the short-time work allowance is not meant to secure the standard of living, but rather to ensure the survival of companies and thus avoid unemployment.
In other areas, the federal corona strategy is rather arbitrary. The craft complained that the vehicle registration offices were closed. There is also much discussion about opening shops up to the limit of 800 square meters. This border was communicated at least improperly and caused confusion and indignation among the shopkeepers.
Now a Hamburg administrative court has declared the 800 square meter rule to be illegal. The court could not understand why opening larger sales areas alone should attract more people to the city center. Necessary infection protection measures could be followed at least as well in larger stores as in smaller facilities.
Whimsical and impractical was initially the requirement that repair shops were allowed to remain open, but the sales rooms had to be closed. Many craftsmen wondered if they could lead the customers through the sales room into the workshop. Another detail from this series of undesirable side effects of the rescue policy.
The border closures, for example with the Czech Republic, mean that the bricklayers are missing in the construction industry and the harvest workers in agriculture from Romania. The state decides a lot, but the consequences are borne by the entrepreneurs and their employees.
The argument for the state’s rapid generosity in the crisis is: rather spend more now to prevent the economy from crashing and millions of jobs be lost than have to finance mass unemployment for a long time. This approach is absolutely correct. But it also remains true: somehow the state rescue billions have to be financed at least in the medium term if the next generations are not to be overwhelmed.
Currently this is done through the use of reserves and debts. Germany certainly has scope. The Federal Republic had just pushed the debt level to below 60 percent, thereby meeting the Maastricht criteria for the first time in many years in 2019. But that will be the last time for a long time.
As a result of the corona crisis, the federal government expects a general government deficit of 7.25 percent of gross domestic product (GDP) this year. The debt ratio as a share of all debts in GDP is estimated at 75.25 percent, as can be seen from the German Stability Program 2020.
“The projection is currently subject to very high levels of uncertainty,” says the current report. In other words, the debt level could be even higher. This mainly depends on how high the losses are that the federal government will incur from its guarantees and sureties.
Given the huge commitments, some in the grand coalition are trying to put the brakes on. “I don’t like the fact that we almost always get new suggestions every hour, what else can you do,” said Union leader Ralph Brinkhaus. “All of this must also be paid for.”
In a crisis, the state’s money is loose. Some sense their chance to finally implement long-held plans.
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
Berlin State aid against the economic consequences of the corona crisis apparently also releases criminal energy: A 31-year-old entrepreneur was arrested on Thursday on suspicion of subsidy fraud. He faces up to five years in prison.
As Chief Prosecutor Thomas Fels, head of the department responsible for money laundering at the Berlin public prosecutor’s office, reported, the man applied for help from various cleaning companies totaling 80,000 euros. From this sum, he was paid 35,000 euros. It was only later that it emerged that some companies for which the aid was requested did not even exist.
Since the beginning of April, the Berlin public prosecutor has been investigating a total of 46 cases against 55 suspects for subsidy fraud. In addition, more than 100 cases are now pending at the Berlin State Criminal Police Office. A total loss of 700,000 euros is currently assumed. “We only see the tip of the iceberg here,” said the Berlin Chief Prosecutor Nina Thom, head of the Asset Recovery Department.
Not an isolated case
The deed of the 31-year-old is not an isolated case. In Berlin, fraudsters managed to get aid for companies that didn’t exist at all. This raises questions about security checks from the Investitionsbank Berlin, which pays the aid.
“Obviously, in some cases there was no plausibility check,” said the chief criminal director of the Berlin State Criminal Police Office, Jochen Sindberg. However, there was great political pressure to quickly help the self-employed and small businesses. In order to remain liquid, companies with up to five employees can receive € 9,000, companies with up to ten employees can receive € 15,000.
In some cases, the LKA received information from banks about strange account movements. In one case, an account was opened, the only purpose of which was obvious to book the Corona help. “We have made the Central Office for Financial Transaction Investigations (FIU) aware of these transactions,” said Sindberg. Banks would have to report suspicious account movements to the FIU.
Overall, the head of the Berlin Investment Bank considers the fraud rate to be marginal given the 200,000 applications. “The majority of companies are open and honest,” said Jürgen Allerkamp at his institute’s press conference for the financial statements.
Fraud cases also in other federal states
This also includes the 2500 companies that have paid back their aid. Obviously, they only realized afterwards that they were not part of the funding group. The repayments have so far amounted to more than 15 million euros.
The situation was different for a young lady who described herself as an Instagram influencer: she had no intention of repaying the help she received, although research by the police showed that she had a well-stocked account and had no liquidity concerns. The Berlin public prosecutor’s office consistently pursues cases of this kind. “We are vigorously after those who, in our eyes, behave in a socially harmful way,” said Sindberg
Not only the state of Berlin has to deal with fraudsters. First, the state of North Rhine-Westphalia (NRW) reported attempts to defraud Corona help with fake websites. The fraudsters tried to lure applicants to their fake page in order to illegally tap public aid on their behalf – but with their own bank details. Aid payments had to be temporarily suspended. Other federal states also reported attempted fraud, but indicated higher security standards.
Munich All or nothing, Bavaria’s Prime Minister Markus Söder (CSU) likes to do politics according to this motto. This is how he does the Munich Oktoberfest, a local economic good that generates a total turnover of 1.2 billion euros. But because a distance of 1.50 meters in beer tents is just as illusionary as a mouthguard when drinking to measure, the Bavarian government together with the city of Munich canceled the popular folk festival for autumn 2020. Söder: “The Oktoberfest takes place correctly, gscheid or not at all.”
This is how things have been going on in recent weeks. Söder, self-proclaimed pioneer in the fight against the corona pandemic, announces bold decisions every day to protect the health of citizens – but all of them also have an impact on whether the economy takes place properly, cleverly or not at all.
The leading role of the trained journalist Söder, who knows public relations like no other, does not meet with undivided praise in Bavaria’s economy – especially since many regulations in the Free State are economically tougher than in other federal states. The high approval ratings of 94 percent that the CSU chief achieved in surveys among the population, he should miss the entrepreneurs, managers and self-employed.
“Of course, some companies would have expected faster steps, but we have to combine health protection and long-term profitability,” says Bertram Brossardt, chief executive of the Association of Bavarian Business (VBW). Security is the top priority.
The association, which traditionally maintains good relationships with the CSU, is “wholly and entirely” behind the measures that have been decided, according to Brossardt: “A relapse with too rapid a loosening would be irresponsible and still for the people of Bavaria, but also for the economy harder blow. ”
Söder is well entrusted with questions of debit and credit. He has established a close network in the Bavarian corporate world, especially since his wife Karin Baumüller-Söder is an active partner in an important Nuremberg auto supplier.
The Munich-based business consultant and economics professor Horst Wildemann praised the head of state in the Bavarian economy: “The fact that the corona policy here is more restrictive than elsewhere in the country does no harm. He is the one who abolished the night watchman state and reintroduced the social market economy. ”Söder has no knowledge problems.
Brewer’s association misses clear perspective
Bavarian brewers see this more critically, and not because of the cancellation of the Oktoberfest. Beer producers have lost half of their sales, mainly because the catering industry is closed. “The current restrictions therefore pose problems for the brewing industry that threaten their very existence. We’re talking about hundreds of traditional, family-run, medium-sized companies, ”complains Lothar Ebbertz, general manager of the Bavarian Brewers’ Association. One is grateful for the possibility of tax deferrals and government-guaranteed loans – but the liquidity problems would only be postponed.
The head of the brewery association misses a clear perspective: “So far we only know that the ministerial present ‘hopes’ to be able to grant unspecified easing of the hospitality shutdown at Whitsun.” “Virus spinner” called. The closure of restaurants is based on this.
A large learning process of the population is ignored, complains Ebbertz. The brewers also want terrace cafes, bars and extensive beer gardens to be open. The risks are lower.
Even the Söder very inclined VBW boss Brossardt thinks that the hotel and restaurant industry needs to be readjusted. The proposal to lower VAT is “a good sign”.
The Bavarian trade association is also dissatisfied. Managing Director Bernd Ohlmann was frustrated to note that on Monday smaller shops (up to 800 square meters) were allowed to reopen in Ulm in Baden-Württemberg, but the shops in Neu-Ulm in Bavaria were closed for a week longer.
It is difficult to understand. Also, Ohlmann does not want to see that larger stores of 3000 square meters could not comply with any protective and hygienic measures: “We would have very much wanted all stores to open and not just those with a limited sales area, that would have been fair.”
“Caught in the lockdown spiral”
The shutdown à la Bavaria Andreas Föller is critical. The founder of recruitment agency Comites believes that Söder must “show its colors”. If you pretend to act prudently, you have to see accompanying and consequential damages and say how things will go. “But Söder remains trapped in the lockdown spiral, which is still successful for him.”
A sense of proportion is needed and not “responsible populism”. You can learn from good pandemic fighters, “test as many as possible, isolate and support risk groups – but let the rest of the world live on and continue to operate.”
Secretly, many in Bavaria’s economy might think so. Praise dominates externally. The Passau entrepreneurial couple Claudia Gugger-Bessinger and Günther Bessinger also give Söder a “one with a star”. The regulations are associated with considerable effort for all companies, but health is the top priority: “It would therefore be irresponsible to talk about massive loosening now, then to release it, to press the return key after a few weeks and one risking a second shutdown. ”In the Bavarian Ministry of Economic Affairs, however, examination requests for offers would be drawn out too long:“ That costs valuable time. ”
Friederike Hrubesch-Mohringer, owner of the family-owned company EurimPharm, is also on the Söder line: “We pharmaceutical importers in particular are supporting the cautious, gradual relaxation of restrictions,” she says, “Markus Söder as Prime Minister of a badly affected state is doing a good job here. ”
Carsten Hochschon, CEO of the start-up Knooing, sums up the thoroughly split judgment against the CSU boss. With him, he says, two hearts would beat in his chest: “that of the private person, I am very satisfied with Söder’s work, and that of the entrepreneur, I am disappointed”.
He fears that 80 percent of startups will not survive the crisis. Fast support would now be needed, “but the hurdles for the announced funding are infinitely high”. This is where Söder should start, says the start-up boss, then the crisis could become an opportunity “for the digital economy, for young innovative companies and thus for Bavaria as a location”.
More: Guest comment Michael Hüther – Politicians are not considering the consequences of combating corona enough
Berlin Scrappage bonus? VAT cut? Negative tax for companies? When the coalition committee draws up an interim assessment of the consequences of the economic standstill on Wednesday evening and provides advice on possible new aid for small and medium-sized businesses, the leaders of the Union and the SPD also want to include advice from economists. However, almost all of the proposals for an economic stimulus package to boost consumption are controversial among economists.
It starts with the question whether, in addition to the rescue aid that has already come into force, the economy needs a medium-term economic stimulus program to get it back on its feet. Yes, say Clemens Fuest, President of the Ifo Institute, and Marcel Fratzscher, President of the German Institute for Economic Research (DIW). “It is not enough just to avoid bankruptcies and unemployment,” said Fratzscher.
No, says Gabriel Felbermayr, President of the Kiel Institute for Economic Research (IfW). “Economic stimulus programs are pointless as long as economic activity is paralyzed by preventing social contacts,” he says. The government must now provide a credible, resilient plan to exit the lockdown. Veronika Grimm is more cautious about saying no to promoting consumption. It requires targeted modernization investments in digitization and climate protection.
Employees of Fratzschers DIW and Felbermayrs IfW even had a day-long Twitter exchange of blows about the need for economic support. After the leading economic research institutes, which included the DIW, the IfW and the Ifo, delivered their joint forecast to Economics Minister Peter Altmaier (CDU) last week, the DIW complained that his recommendations for an economic stimulus program had been kept outside by the other institutes .
More short-time work allowance? Broad tax cuts? “We don’t need all of that,” says Felbermayr. He is convinced: “If the companies’ equity base remains successful, then after the crisis they can continue where they had to stop because of the crisis.”
Marcel Fratzscher is President of the German Institute for Economic Research.
(Photo: imago / IPON)
He does not consider it necessary to strengthen purchasing power. “We save more than usual because we can consume less. The money is available for consumption as soon as the lockdown ends, ”he says.
In contrast, Fratzscher and Fuest are convinced that the crisis is so deep that the state must support the economy. Short-time work, for example, is associated with a loss of income. However, Fuest warns: “The state should use the money very specifically for additional measures”, after all, the national debt is already increasing rapidly.
With the short-time work allowance, for example, which Federal Labor Minister Hubertus Heil (SPD) wants to increase for everyone, Fuest suggests increasing it only for those who would otherwise fall under the social assistance limit. As with the solo self-employed, this could be done without a wealth check, says Fuest.
In the Union too, it was said, an increase can only be imagined for lower income groups. There are also voices from the CDU and CSU that have not yet decided on new aid programs, but want to monitor developments for two to three weeks.
Fratzscher, in turn, wants to strengthen purchasing power through temporarily lower social contributions. That would also help employers. “Broad income tax cuts would now be of little use because they are more likely to help people with higher incomes,” said Fratzscher.
It is undisputed that the economy is suffering enormously from the contact bans imposed in mid-March. The figures that the Ministry of Economic Affairs had prepared for the coalition committee and which are available to the Handelsblatt describe a catastrophic situation.
By April 13, 725,000 companies had registered with the Federal Employment Agency for short-time work. The applications already examined concerned over one million employees. 13,000 companies have applied for liquidity aid from KfW amounting to 26 billion euros.
And 1.1 million small businesses were granted grants of nine billion euros. According to data from the HDE retail association, 70,000 hotels and restaurants are facing bankruptcy. In a lightning survey by KfW on the start-up platform, 90 percent of the self-employed indicated a drop in sales. “We are currently experiencing a massive economic downturn,” says Fuest.
Purchase premium in the criticism
The purchase premium demanded by the auto industry is particularly bad for the economists surveyed by the Handelsblatt. Fuest advises the government to consider what the 2009 scrappage bonus actually did before making a decision.
In no case does he want to see the bonus linked to the scrapping of old cars. Fratzscher thinks that a scrappage bonus could be an incentive to buy a car; but it must promote new drives. “If you can’t do this, the state should invest in charging stations instead of subsidizing the status quo,” he said.
The Veronika Grimm economy considers “a scrapping premium to be the wrong instrument”. It would “potentially bring hundreds of thousands of new petrol engines to the fleet and delay the transformation towards climate-friendly mobility,” she said.
The population is also against the premium, as a representative survey by the polling institute Civey shows, which is available to the Handelsblatt: 62 percent answer the question “Should the federal government support the purchase of new cars with a scrapping premium for old vehicles as a result of the corona pandemic?” “No, definitely not” and “rather no”.
It is better, says Grimm, that the state should invest money in the expansion of IT networks and in schools. This is all the more important since children from educationally disadvantaged classes would now suffer new disadvantages due to the school closings.
Fuest also relies on targeted investments: “IT specialists are now available, so it would be the right time to reduce the IT backlog in administration,” he said. The digital skills of workers should also be trained. There was time for this during short-time work. “We now have free construction capacities that did not exist before Corona,” said Fuest, who therefore advises that public construction investments be preferred.
Fratzscher also demands the promotion of the domestic economy. “It will not work for Germany to export itself out of the crisis,” he said. Economic growth in key customer countries, such as China and the USA, is too weak for this.
Even the proposal to lower VAT is not well received by economists. On the one hand, with loss of revenue of twelve billion euros per percentage point, this is particularly expensive for the state treasury. Fratzscher also doubts that the relief would be passed on to customers. “It would therefore be a subsidy to companies that would not increase demand,” he said.
Fuest is also skeptical about a VAT cut that several prime ministers want for restaurants. “If you choose to do it, it would only be temporary,” he said. “But then later you would have the problem of getting out of this exception,” he fears.
Compensation for lost profits?
There is, however, one way that economists would go together: relief for companies that profit taxes do not have to be paid this year, but are postponed to other years through generous tax advances and tax returns. The companies would then come out of the corona crisis with significantly less debt.
Gabriel Felbermayr has been President of the Institute for the World Economy since March 2019.
This was suggested by the former economist Peter Bofinger. Immediate depreciation for investments is also widely supported. Felbermayr also thinks this makes sense. He also advocates a “negative tax”, where companies would be reimbursed for profits based on profit taxes for 2019 for 2020 – repayable from 2021.
Michael Hüther, head of the employers’ institute of the German economy (IW), had also asked for a negative tax. Fuest can also envisage government grants that would have to be repaid if profits flow again.
Bofinger even thinks that the companies could demand compensation from the state for their lockdown-related loss of profits. “You shouldn’t treat them like supplicants,” he said. “Hotels, for example, cannot help that they cannot do business.” The corona crisis is completely different from the financial crisis that bank managers caused.
“If the regulatory principle applies that responsibility and liability go hand in hand, then companies should get money from the state,” he says. Like the farmers after the tsunami: “The state did not take part in the farms in return,” said Bofinger.
More: Different sectors are affected to different degrees by the corona crisis. The state should therefore rely on industry-specific solutions to boost the economy again, says Handelsblatt editor-in-chief Sven Afhüppe.
Berlin The run on the new quick loans from the state development bank KfW has started. But fintechs hardly play a role in the distribution of funds, and that annoys the young technology-driven financial companies: “It stunned me that the house bank principle should also apply to quick loans for small and medium-sized companies,” criticized Marko Wenthin, head of the online bank for business customers, Penta .
Although KfW is completely at risk with these loans, an entire market sector, the fintechs, is excluded from this lending process.
On Wednesday, the federal government opened another protective shield for corona-damaged companies. Companies with ten or more employees can apply for a KfW quick loan, which is 100 percent secured by the federal government. However, to the annoyance of the fintechs, these loans are only allowed to pass through the house banks such as savings banks, Volksbanks or private banks.
For the Penta boss, the fintechs, who are subject to bank regulation or use processes approved by the financial regulator Bafin, are predestined to participate in this public funding program. “We carry out the highest banking standards to identify our customers, the so-called KYC process (Know Your Customer), and can scale quickly thanks to our digital expertise,” said Wenthin.
The co-boss of the financial services provider for the self-employed, Kontist, agrees with the criticism. “After all, it is unreasonable to expect Penta, Kontist or other digital financial service providers to turn to a savings bank or cooperative bank especially for public aid,” says Sibylle Strack.
The Federal Ministry of Economics, however, assumes that only the use of established procedures ensures that the loans arrive at the company as quickly as possible. For this reason, lending within the framework of the KfW special program is based on the established house bank principle with the banks accredited by KfW, explained a spokeswoman. Even with a 100 percent liability waiver, certain customary bank procedures would have to be followed.
In contrast, the Federal Ministry of Finance (BMF) is open to criticism. “We are constantly reviewing proposals to further improve government aid programs. This also includes the proposal to involve fintechs in KfW lending, ”emphasized a spokeswoman. The chairman of the Fintech Council, who is located at the BMF, does not see the door slammed yet. “The processes are constantly being optimized at high pressure. I also see the greatest potential for working with fintechs there, ”said Chris Bartz.
Fintechs are not only criticizing the practice of granting KfW quick loans. For Kontist’s co-boss, the Corona emergency aids for self-employed persons and small businesses “go beyond the realities of life”. Her main criticism: Unlike the KfW quick loans for companies with ten or more employees, this aid should not be used as an entrepreneur’s wage. “Legislators must ensure the same conditions as quickly as possible, otherwise our clients will quickly face Hartz IV for basic security”, demands Strack. Hundreds of thousands of self-employed people could be affected.
The Federal Ministry of Economics does not explain why the emergency aid may not be used as entrepreneurial wages. But the ministry justifies the exceptions in the quick loan as follows: If the KfW quick loan is drawn on, a distribution of profits and dividends is excluded. “Due to the loan terms of up to ten years, customary market remuneration to business owners is excluded,” said the spokeswoman.
Not only fintechs like Penta and Kontist see opportunities in the corona crisis to offer help for their customers. FinAPI sees its strengths in fraud prevention. According to Florian Haagen, head of Fintech, which offers interfaces to bank accounts, among other things, applicants should be checked when granting emergency aid. “There are cases where fraudsters apply for emergency aid with little publicly available or undercover information,” he says. “In order to prevent fraud, we recommend checking whether the applicant is actually a so-called beneficial owner and the specified account is in their name or the company.”
This control is often difficult or impossible to do manually. Together with its parent company, the Schufa economic information file, FinAPI therefore offers banks the appropriate technology with which they can automatically check the applications and validate the account details provided. One is already “in very concrete talks” with various institutes.
More:Fintechs – That could be the crisis winners and losers.
Warsaw The sale of the holiday plane Condor to the owner of the Polish airline LOT has failed. A spokeswoman for the state PGL confirmed the withdrawal. PGL informed Condor of this on Monday. She didn’t want to say more about it.
The move had emerged in the face of the corona crisis, as the Reuters news agency had previously reported. A good week ago it was said that LOT itself needed state aid. “In the case of the Lot, we certainly cannot do without public help,” Poland’s Treasury Minister Jacek Sasin had recently told TVN24. He was in constant contact with the airline’s board of directors. This prepared a rescue plan in the event that the flight connections would be interrupted for many months.
The protective shield plan of the insolvency specialist Lucas Flöther provided for the sale of the Condor with more than 50 aircraft and around 4,900 employees to PGL. No information was given on the price.
Spokesmen for Condor and administrator Lucas Flöther did not want to comment on the cancellation from Poland any more than the Federal Ministry of Economics.
PGL had won the contract for Condor in January with the former parent company for around 300 million euros Thomas Cook had gotten into trouble. According to insiders, the Poles had recently made the takeover dependent on far-reaching state guarantees. With the withdrawal, a temporary nationalization of Condor should come closer. The company is currently financed with a EUR 380 million bridge loan from the State Bank KfW, which will expire this week.
More: Lufthansa converts passenger to freight jets.
In connection with the emergency aid, fraudsters have set up many fake sites to tap the financial aid.
Dusseldorf There has been another fraud case related to Corona Emergency Aid. As reported by the Süddeutsche Zeitung, criminals have copied the website of the NRW Ministry of Economics in order to get the data from companies seeking help. The fraudsters wanted to redirect the money to their own bank account. This emerges from research by NDR, WDR and Süddeutscher Zeitung. Representatives of the NRW Ministry and the Ministry of Economic Affairs have confirmed this.
The research reveals that last Wednesday, April 8, the fake page Wirtschaft-nrw.info was registered, which also contains an application form for Corona emergency aid. The website server is located in the United States and the operators are hidden behind a concealment service from Panama.
The fake page looks so real that even for experts, the fake was not recognizable at first glance. Investigators in the Cybercrime Competence Center of the State Criminal Police Office are now concerned with removing the fake side from the net. The real site was temporarily shut down on Thursday due to earlier attempts to defraud, but should soon start again.
More: At least 3,500 applicants have been drawn to the wrong website by criminals. The authorities’ response lasted almost a week.