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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

“The state is a lousy entrepreneur”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Risk zombie company

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

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

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

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

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

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

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

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

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

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

Dangerous false incentives

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Corona crisis: family entrepreneurs warn of “SME gap”

Such an explosion in applications for short-time work has never even begun, not even at the height of the financial crisis in 2008. Coping with the virus epidemic is a “historic task”, said Federal Labor Minister Hubertus Heil (SPD). The number of applications in the corona crisis would “far exceed” that from the financial crisis.

This is also indicated by a survey by the association “Die Familienunternehmer”, which is available to the Handelsblatt. 65 percent of the 1465 companies surveyed indicated that their business activity had decreased – by an average of 50 percent. Almost a third of the companies (31 percent) have already applied for short-time work benefits, and another third (33 percent) want to do so by the end of next week.

These figures are alarming by themselves. But for association head Reinhold von Eben-Worlée they are special again, because for many of these companies of all places there is no state support beyond discounted loans. “Many companies already have their backs to the wall,” said the association president. State aid to the economy is far from being received by all companies to the same extent: “There is a huge gap in the middle class.”

While the federal government wants to keep small businesses with up to ten employees afloat with emergency aid and has set up a rescue package for large companies, many small and medium-sized businesses can only get help if, as in Bavaria, the responsible state government has launched its own aid program.


However, this is not the case in many federal states. “If the companies run out of money before they get the aid, the economic downward spiral can no longer be stopped,” warns association head Eben-Worlée.

He receives support from Thomas Bareiß (CDU). According to the Handelsblatt, the Secretary of State for Economic Affairs is to become the Federal Government’s new “Mittelstandsbeauftragter”, this Wednesday the cabinet will deal with the personnel. It is clear, says Bareiß, that the rescue programs that have been decided “will not be enough on their own”.

Above all, Bareiß is worried that the liquidity crisis of many companies could turn into a debt crisis: “We have to prepare for the additional programs that might be necessary to strengthen the companies,” he warned. “In the end, this could also be direct payments or far-reaching tax relief so that companies can build up capital again after the crisis and have the chance to reduce their debts.”

For the time being, however, the Federal Government does not want to follow up on the aid programs. The only thing under discussion is a more generous arrangement of loan support through KfW-Bank. Loans for companies with ten to 250 employees could be secured with a 100 percent state liability. So far, the state development bank has assumed 80 to 90 percent of the risk in the event that entrepreneurs cannot repay the money.

However, banks are demanding that KfW’s liability be increased to 100 percent. Many house banks would avoid any risk in the current crisis and would therefore no longer lend to companies if the risk was not fully hedged.

A decision has not yet been made. The EU Commission would have to give the green light first. In addition, the measure is not without controversy within the federal government. The Federal Ministry of Economics, in particular, believes that house banks should not be allowed to get rid of every risk.


Even now, the state guarantee for loans would go far beyond that in the financial crisis. “We will first have to live with the current regulation,” said Federal Finance Minister Olaf Scholz (SPD). At the same time, he asked the banks “in the crisis when checking loan applications” to leave a little bit five. ”

In contrast, start-ups can rely on more support from the state. On Tuesday, Scholz surprisingly announced that it would prefer parts of a long-planned start-up fund worth ten billion euros.

This fund is intended to invest in young companies through a subsidiary of the state-owned KfW bank and will ultimately reach a volume of ten billion euros. Two billion of these are now to be used as quickly as possible to help young companies.

“Fitness program” for the economy

Many founders also suffer from difficulties because financing rounds are postponed due to the corona crisis. “We want these innovative companies to remain in our country,” said Scholz.

In addition, the Ministry of Economic Affairs is already working on a “fitness program” for the period after the crisis, with which the companies are to be brought back up to speed for international competition.

It is about “structural improvements, for example in taxes and bureaucracy and digitization,” said Bareiß. The government would also have to take energy costs into account.

More: Solidarity is required among companies in the corona crisis. There are encouraging examples, but also bad ones, says Handelsblatt author Jürgen Flauger.


The corona crisis shows the strength of the social market economy

Some of them now want to cook their ideological soup on these decisions. The daily newspaper “taz” proclaims the “Corona twilight for neoliberalism” because of the state measures. And Juso boss Kevin Kühnert explains in a generous pose that howl of triumph is out of place. The suggestion that he brought corporate groups into play before the crisis was “small-minded”.

Small-minded is above all the attempt to start a fundamental economic debate from the corona crisis. The massive government intervention with a € 1.2 trillion rescue package is an emergency measure. In times of crisis with a massive disruption to the economy, the state as an active player is crucial. However, this is neither a new finding nor particularly controversial.

Even in the United States, unsuspicious of socialism, banks were nationalized without hesitation during the financial crisis. And now the government is back, as the gigantic stimulus package shows. In this respect, the many malicious comments in the direction of liberal economists and politicians, why the market does not regulate it in the corona crisis, miss the point. Nobody ever said what is assumed.

The crucial point is: From the measures in a crisis situation little conclusions can be drawn for the normal state. The state intervention, accompanied by massive debt, is currently justified to ward off permanent damage to the economy and prosperity.

However, this does not mean that it can serve to increase prosperity in the long term. An exception may not be the rule here any more than with the exit restrictions.

The reason is clearly non-economic in nature

Nevertheless, there is currently a strange tendency to seek knowledge or even benefit in the corona crisis in relation to economic policy. In a caricature of the “Süddeutsche Zeitung” the “Covid-19” is drawn as a stone in the gears of “turbo capitalism”.

And green activists ponder the positive effects of the pandemic on climate protection. The virus then becomes nature’s revenge on the globalized economic world, as epidemics were once interpreted as God’s punishment. This is cynical in the face of fatalities, and cynical for those who are worried about their existence as entrepreneurs or who have to fear for their jobs as employees.

This crisis should not be used as a tool to settle economic policies, because the cause of the virus is clearly non-economic. Unlike the financial crisis, which actually exposed an unhealthy level of deregulation and misconduct in the banking industry.

The corona virus, on the other hand, is blind to economic systems; it affects both China and the USA. Differences can be seen in the performance of health systems. And German is not doing so badly, despite undeniable problems.

Contrary to what the critics think, the corona crisis does not reveal errors in the social market economy, but shows its strength. After years of upswing and the black zero, the state now has to counteract all financial strength and put together gigantic rescue packages for the economy. The social network is stable, the coffers of the Federal Employment Agency are well stocked to avoid possible mass layoffs with short-time work benefits.

Private companies are flexible and productive

And not only does the state work, it also works for many companies. Automakers like Volkswagen check the production of medical equipment, breweries produce cleaning alcohol and give it away as a disinfectant to hospitals, textile companies switch from fashion to mouth protection.

This shows not only the flexibility and performance of private companies, but also a sense of social responsibility. It is not a systemic problem that there are negative outliers in all positive examples, such as the sporting goods group Adidas, which uses a law for existential small tenants to cut their rent payments despite the profit of billions. The nice thing about a market economy is that customers can sanction such behavior. The damage to the image of Adidas is now greater than any rent savings.

Despite all the problems and shortcomings that arise in such a crisis, the bottom line is that Corona has shown not only the performance of the health system in Germany, but also the economic system.

More: “Life and health must have priority” – Minister of Labor Hubertus Heil warns of the hasty end of the shutdown.


How the federal government wants to save companies

Berlin It was an unusual Bundestag session on Wednesday morning. Only every third chair was allowed to be occupied by parliamentarians. The spaces in between had to remain free. President of the Bundestag Wolfgang Schäuble (CDU) asked the MPs to keep the necessary distance of 1.50 meters in the corona crisis in order not to infect anyone. “If there is not enough space in the hall, we have also created space in the visitors’ gallery.”

As many MPs as possible had traveled to Berlin for the meeting to ensure that the chancellor majority needed to adopt the crisis measures. However, the Bundestag stipulated for the future to be quorate even if only a quarter of the members are still present. “Parliamentary democracy will not be overridden,” said Schäuble. Parliament remains able to act.

It immediately demonstrated its ability to act. In the afternoon, the Bundestag hastily passed the billion dollar rescue packages for the economy. The Federal Council still has to agree on Friday.

“Hard weeks are ahead of us. We can cope with them if we show solidarity, ”Vice Chancellor Olaf Scholz (SPD) had previously advertised for the aid packages. Scholz spoke on behalf of Chancellor Angela Merkel, who is still in quarantine at home.

The measures would result in a supplementary budget of 156 billion euros – “a gigantic sum,” said Scholz. But this is necessary to mitigate the consequences of the crisis. In total, including sureties and discounted KfW loans, it is even about aid measures with a volume of 1.2 trillion euros.

Despite this huge sum, artisans, retailers and restaurateurs fear falling through the grate. Emergency aid is available for small companies with up to ten employees, and a new rescue fund (WSF) for large companies, which also grants direct grants as a supplement to KfW liquidity aid – provided the companies have at least 249 employees, 43 million euros in total assets and 50 million euros in sales .

Employer President Ingo Kramer praised the decisions: “What has now been launched is a huge and very targeted aid package,” he told the Handelsblatt.

The rescue package must also be accessible to companies, the associations of hotels, restaurants and caterers, Dehoga and IHA, the retail association HDE and the craft association ZDH demanded.

Fear of overwhelming the rescue package

“Many medium-sized companies with more than ten employees are at risk of falling through the network of federal support measures,” feared craft president Hans Peter Wollseifer. These companies also needed emergency aid, for example when pending wages or subsidizing rents.
Finance minister Scholz promised in the Bundestag that the government would do everything to mitigate the corona consequences. “There is no script for this.” If necessary, the government will decide on further measures. In concrete terms, Scholz already promised employers that he would have examinations made to make tax-free wages that they want to pay their employees in the crisis. That was what medium-sized companies had asked for.


In the Bundestag, however, other criticisms were initially in focus on Wednesday. A number of MPs were upset with the federal government. Around 15,000 companies are said to be able to slip under the rescue fund.

Union economic leaders fear that this large number could overwhelm the bailout fund – and lead to arbitrary decisions. Therefore, they particularly urged changes to the possibility of the rescue fund to nationalize companies in need. They demanded that the hurdles be raised so that the instrument could not be used indiscriminately.

However, the Ministry of Finance rejected all proposed changes. At 0.08 a.m. Tuesday night the house sent a large package with numerous changes to the law. “That is not possible, not even in these times,” said a CDU MP. “How are we supposed to go through the paperwork until the next morning’s resolution when we get it at midnight?”

Lambrecht for nationalization if necessary

The Federal Ministry of Finance is against criticism. “We have taken up many requests for changes, such as the desire of the federal states to put federal and state programs legally on an equal footing, or to include start-ups in the rescue package,” said the Ministry of Finance. However, one cannot take all wishes into account. And time is short.

Federal Minister of Justice Christine Lambrecht (SPD) also defended the rapid pace. “The current situation requires quick and decisive action,” the SPD politician told the Handelsblatt. She also spoke in favor of completely nationalizing companies if necessary.

“In the crisis, it is imperative that we protect our country’s economic structure and prevent major companies from being sold out or broken up,” said Lambrecht. “The state is ready to partially or wholly participate in companies if this should become necessary.”

However, the Bundestag was able to implement changes elsewhere. For example, companies that use state aid should not be allowed to pay dividends, bonuses or share packages to their top managers. The housekeepers are learning lessons from the financial crisis. At that time, board members of the real estate bank HRE had approved millions of bonuses despite the state’s rescue.

In addition, the Bundestag demands that the state sell shares in companies “at the latest after ten years”, “unless there are urgent economic reasons or reasons that are important for the German economy”, as it was stated in a bill.

“Against this background, the bonus lock for board members makes sense,” said one MP. “This is the biggest incentive for companies to get out of state participation as quickly as possible.” The Bundestag also assures itself of a say. Rescue measures of over 500 million euros are to be discussed in the Budget Committee.

Help without collateral deposited

Another new feature is that start-ups can slip under the protective shield. Up until shortly before the Bundestag session, the details were discussed. Result: All young companies are entitled to help, provided they are systemically relevant and can demonstrate goodwill of at least 50 million euros.

After the accelerated legislation, it is now a matter of publicizing many rescue measures. The statutory health insurance company points out a particularly important point in a circular: On request, companies in need can have the contributions for pension, health and unemployment insurance due for the months of March to May, so that they do not run into liquidity problems.

The employer does not have to offer any security for this, nor is deferred interest or late payments charged. However, the deferral option only applies if other government aid does not work. For example, the expansion of short-time working stipulates that companies are fully reimbursed by the state for the social contributions for lost hours.

More: What the Bundestag has decided in detail.


600 billion package to save large companies from destruction

Germany State aid

600 billion package to save large companies from destruction

| Reading time: 3 minutes

Olaf Scholz reaches deep into the state wallet

Federal Finance Minister Olaf Scholz reaches deep into the state wallet. 150 billion euros should help small businesses and solo self-employed people through the crisis. Scholz wants to support the clinics with three billion euros.

The federal government wants to help companies with more than 2,000 employees with a gigantic fund. More money is used here than in the banking crisis. Finance Minister Scholz’s draft law contains a delicate clause.

Dhe federal government also wants to save large companies through nationalization in the corona crisis. The so-called Economic Stabilization Fund (WSF) is, according to current plans, to help companies with over 2000 employees and 320 million euros in annual turnover if they are affected by the crisis in an economic imbalance devices. The fund will have a total volume of EUR 600 billion. This emerges from the bill by Federal Finance Minister Olaf Scholz (SPD), which is available to WELT AM SONNTAG.

The WSF is thus larger than the Soffin banking aid fund in the 2008/09 financial crisis with its volume of up to 480 billion euros. With EUR 400 billion, the fund can take on debt and liabilities from companies asking for help. Scholz wants to put 100 billion euros in the fund for credit authorizations for participation measures in the companies alone, and another 100 billion euros should be available for special programs of the state-owned banking group KfW in the wake of the Corona crisis.

That means: If German companies find themselves in an existential imbalance, the Federal Government can secure them with an injection of capital. At the same time, the company would have to transfer capital shares to the federal government. In fact, it would be partially or fully nationalized. Later, when the crisis is over, these holdings will be privatized again. However, financial corporations are not covered by this bailout.

Among other things, the Federal Minister of Finance hopes that this support will ensure that the companies concerned remain creditworthy with the banks and do not slip into insolvency due to liquidity bottlenecks. For the time being, the federal government itself would not incur any budget expenditure, the draft says. However, borrowing to refinance the fund leads to higher debt.

The Ministry of Finance hopes that since the fund can acquire shares in companies and raise guarantee premiums, the burden on public budgets will remain limited. “Even if you add up all the previous aid programs because of the Corona crisis, we are operating in an acceptable debt ratio,” government officials said.

also read


Billions in aid for the self-employed

Meanwhile, various top politicians have once again called on the population to strictly maintain the necessary social distance. Federal Interior Minister Horst Seehofer (CSU) told this newspaper: “Anyone who behaves unreasonably and therefore roughly ruthlessly risks thousands of deaths. We are determined to prevent that. Protecting our people is a top priority. ”

North Rhine-Westphalia’s Interior Minister Herbert Reul advises a nationwide rule on a curfew. The CDU politician told WELT AM SONNTAG: “There is a demand for nationwide or, even better, nationwide regulations that prohibit the gathering of people and public meetings of several people.” Germany does not need competition for ever stricter rules, but effective measures.

The European Commission is nevertheless calling on the countries of the European Union to take drastic measures in the fight against the corona epidemic. “It is vital that the measures to establish social distance are implemented early, decisively and quickly. This is the only way to slow the spread of the virus and reduce the pressure on health systems, ”said the responsible EU health commissioner Stella Kyriakides this newspaper. At the same time, she called on EU member states to improve cooperation against the corona virus. The measures implemented by individual EU countries could “have a negative effect on attempts to contain others”.

The Robert Koch Institute (RKI) meanwhile announced that the first results of the evaluation of mobility data of the population would be published as early as next week. This should make it possible for the first time to analyze whether mobility behavior has changed and citizens have largely stayed at home. The RKI is the central institution of the federal government for disease monitoring and prevention.

This text is from the WELT AM SONNTAG. We would be happy to deliver them to your home regularly.

Packshot half page WELT AM SONNTAG, ET March 22nd, 2020

Source: World on Sunday


Scholz plans record debt of 156 billion euros due to Corona crisis

Berlin Federal Finance Minister Olaf Scholz (SPD) will make record debt this year due to the corona crisis. “The enormous challenges that have to be overcome in connection with the pandemic make it necessary to take out loans to finance the burdens in the amount of around 156.3 billion euros,” says a supplementary budget for the Federal Ministry of Finance for 2020. The draft of the supplementary budget, which is to be approved by the cabinet on Monday, is available to the Handelsblatt.

After that, Scholz plans to spend almost 123 billion euros more. Overall, spending will rise to just under 485 billion euros in 2020. At the same time, the epidemic has reduced revenues due to the economic crisis. “The Federal Government is therefore anticipating lower tax revenues of EUR 33.5 billion than originally planned in the 2020 budget,” says the supplementary budget.

With the 2020 supplementary budget, the federal government is resolutely opposing the effects of the pandemic in terms of both health and economic challenges, the paper says. A further 60 billion euros would be made available with the supplementary budget, which could be used in the short term for the immediate fight against pandemics. The supplementary budget provides for 50 billion euros to support small business owners and “solo self-employed”.

The supplementary budget also increases the federal guarantee volume for the state-owned KfW bank so that it can help companies, including with liquidity loans. The supplementary budget raises the guarantee framework by around EUR 357 billion to around EUR 822 billion, the paper said.

More: All developments on the corona crisis in the news blog.


Virus epidemic: between corona hysteria and true risk: ways out of the fear trap

Companies in need, markets in turmoil, politicians on the alert: The fear of the virus is understandable – but disproportionate. Examples show ways out of panic. .

How we can escape panic

The future of Krefeld is at stake, a look ahead to 2030. This is the invitation from the local Chamber of Industry and Commerce (IHK). But the real attraction last Tuesday is the speaker: Prime Minister Armin Laschet, who is running for the CDU party chair and could be Germany’s next chancellor. The rush is correspondingly large, even in times of corona and growing hysteria everywhere.

But it is not that easy to see Laschet. A woman at the front door points to the disinfection dispenser in a friendly but determined manner. Each of the 400 visitors, entrepreneurs, politicians, cream their hands well. Everyone also fills out the “Infection Protection Declaration”. “Have you been in one of the risk areas in the last 14 days?”, “Have you been in contact with an infected person in the last 14 days?” Even sniffing is asked in Krefeld.

The health department actually had the event in Audi-Centre already canceled. The Mayor of Krefeld intervened, but in the end the Chamber of Commerce was allowed to open the doors – but only under strict conditions. The snack: canceled. Free choice of seats: prohibited.

Everyone is assigned a numbered seat and must provide their cell phone number. A precautionary measure if someone later proves the coronavirus. The health department can then determine exactly who was sitting in front of, next to or behind the infected person.

Ballet in Shanghai

The dancers must wear respirators during training.

(Photo: AP)

Welcome to the new corona world! Whoever talks to the entrepreneurs in the audience does not hear complaints about the virus, but rather the seemingly absurdly sharp countermeasures. Deliveries don’t come, orders fail. “This crisis for human health can be followed by a major crisis in the global economy,” warns Laschet in his speech.

If a trade fair was canceled, this could be a “single catastrophe” for a medium-sized entrepreneur. Perhaps they only have the chance to present their products to the global market once a year. Such effects cannot yet be foreseen.

A special case of overreaction hit the headlines a few days ago. The US Federal Reserve cut the base rate by 50 basis points. No sensible step in the eyes of Mohamed El-Erian, US economist and advisor to the Allianz insurance group. “An unscheduled interest rate cut and then a further 0.5 percentage points signals an emergency situation.” That had unsettled the markets even more.

The question arises: are the measures against the corona virus and the rampant fear of infection still adequate? Of course, the danger should never be underestimated. Thousands of people have died of Covid-19. But: compared to other viral diseases, the new virus has so far been rather harmless. 99 percent of all people outside of China survived the disease safely.

Every day more people die in traffic in the world than at Covid-19. Nevertheless, we all get back into the car or bike every morning. In the eyes of most Germans, public reactions are exaggerated: 52 percent share this view, according to a survey commissioned exclusively for the Handelsblatt.


Why is the world reacting so dramatically anyway? The suddenness of the epidemic scares us deep down. “The fear of corona is somewhat comparable to the fear of terrorism,” explains Dan Ariely, behavioral economist and professor at Duke University – everyone is afraid, although the likelihood of becoming a victim is rather low.

Nevertheless, trade fairs, events, sporting events, conferences and premieres are canceled dozen times. It was announced on Wednesday that even the release of the new James Bond film, which is planned for early April, will be postponed until autumn.
How should entrepreneurs, investors and politicians behave in such an environment?

“Individual decision-makers often do not have enough specialist knowledge and insight to make the appropriate decisions,” says Veronika Grimm, behavioral economist and Germany’s new business. She recommends a “rule-based approach”, only in this way can a “spiral” be prevented that “maximally risk-averse behavior takes place – just because nobody wants to do anything wrong”.

Corona briefing

Specifically, Michael Hüther, head of the Institute of German Business, suggests aid measures such as corporate loans or the expansion of short-time work benefits for stabilization.

A trip to Bönen, a municipality in North Rhine-Westphalia, shows how this works. The location should be classified better by many with the Kamener Kreuz A1, which is very close. Kik’s headquarters are located in Bönen. The well-known textile discounter, which belongs to the realm of the family company Tengelmann, prepared exemplary for the crisis, if for other reasons.

Textile discounter Kik: well equipped for Corona

The former Tengelmann boss Karl-Erivan Haub did not actually know fear. He ventured on ski tours in extreme mountain conditions, ran marathons in remote areas of the world. But in business operations, the manager, who died in 2018, took great care and was afraid of natural disasters, power cuts – or even pandemics. That is why he obliged each subsidiary to set up a permanent crisis team that meets three to four times a year and draws up plans for all possible scenarios.


The textile discounter Kik was therefore ideally equipped for the corona virus. “We have already developed a certain routine for behavior in the event of a crisis,” says Jörg Oudshoorn, head of the crisis team. “We have a pandemic plan with clear processes that we now only have to adapt to the specific situation.” First, the most important employees for the business process were listed and equipped with protective clothing such as breathing masks.

All other employees have a laptop and other technology so that they can work from home if necessary. Finally, communication plans were drawn up to be able to maintain operations in the event of a crisis: who can be reached, how and when?

With the corona virus, Kik stopped business trips to Italy, Asia should be avoided if possible. Many deliveries come from there, the dealer currently has no replenishment problems because he already has most of the goods for autumn in the German warehouse. Nevertheless, discussions were held with each supplier and emergency plans were drawn up with the buyers in the event that the production break should take longer than expected. “It is extremely challenging for shopping,” says Kik boss Patrick Zahn.

“Dealing with this crisis has a lot to do with psychology,” observes Zahn. Panic can also be contagious, as you could see, for example, when buying hamsters in supermarkets. “When you comment on the corona virus, it’s a constant balancing act between duty of care for employees and the increase in general excitement.”

But despite all the preparations, the corona virus brought new insights to the Kik boss. “We know that communication must be earlier and clearer to give employees security.” The desire for reliable information in the workforce is high.


And Zahn learned something else. The company, which has very intensive business relationships with Asia, initially focused on China when solving problems. “But we quickly realized that the situation has an impact on all areas of the company.”

Like Kik, many entrepreneurs have to deal with an unsafe situation. The atmosphere can be captured well in Krefeld at the IHK evening. Even if the security precautions are drastic, hardly anyone shakes hands: Nobody is really afraid of the virus here.

The economic effects are much worse: “We have two companies in China, the supply chains there are completely damaged,” says Erich Bröker, managing director of the Krefeld subsidiary Kleinewefers, which has holdings in mechanical engineering, among other things. They would also notice the fear of viruses when they received the order. “In terms of sales it is very slow, companies order fewer machines and prefer to wait.”

Jana Bender is a few meters away. She also feels the crisis in her company. Krefelder Logistik Dienst GmbH often transports goods from China, is a lot for Amazon on road. “Orders are falling, fewer and fewer containers are in the warehouse,” says the boss of 15 employees. She personally is not afraid of the virus, you could also catch a normal flu. “But I’m afraid that Corona will completely paralyze the economy.”