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.


Economy warns of exaggeration in the fight against Corona

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

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

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

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

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

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

Read the full interview here:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Corona crisis: Zero hour: How a responsible restart of the economy succeeds

The fight against the corona virus saves lives. But the standstill threatens the existence of many companies. Can normality return? .

How can business and health be reconciled?

The largest automobile plant in the world is dead in the April sun. No worker far and wide. Up to one million vehicles can be manufactured in the Wolfsburg halls every year. At the end of the bridge over the Mittelland Canal, only one of the guards greets you VolkswagenSecurity team. He keeps his distance. “Corona,” he says with defensive hands.

The blast furnaces of Salzgitter AG are located not far from the Autostadt in Lower Saxony. The group has cut steel production, hardly a cloud leaves the chimneys towards the sky. Why too? Steel for cars is not in demand right now.

The aircraft of Frankfurt Airport are parked on a tarmac at Frankfurt Airport Lufthansa. Hundreds of onlookers stand at the fences despite initial corona restrictions. The silence on the four runways is unusual, historical. Most flight attendants and pilots’ duty rosters remain empty these days.

They are the scenes of a country at a standstill. Streets without cars, sights without tourists, trains without passengers. Everything is subordinated to the fight against the corona virus, social life, culture, the economy: for the first time since the end of the Second World War, Germany’s assembly lines have been standing still. It’s zero hour, if you will.

The shutdown saves lives. But Germany also pays a price for this: the Ifo Institute calculated exactly 42 billion euros per week. These are “astronomical costs,” says Ifo President Clemens Fuest. “This roughly corresponds to the German defense budget”.

The first month of standstill will soon be over. And that raises a few crucial questions: How long can a rich economy endure such a situation? What can a way back to normal look like? And above all: how can companies prepare for the time after the crisis?

According to a recent study by the Boston Consulting Group (BCG), a third of the companies are threatened with a lockdown after three months. Another third could last four to six months. During this time, the companies would lose so much substance that they would hardly be able to start again.

Starting up, however, is much more difficult than driving down: Every new business, every additional euro of sales after the start, costs the company money – for example, for the purchase of preliminary products.

With these numbers, the pressure on politics increases. The first easing measures could be decided at a federal-state conference on Tuesday, the first step on the long road to normalcy. “We need a clear road map that will get public and economic life going again,” says Armin Laschet, Prime Minister of North Rhine-Westphalia and candidate for the CDU party chair.

Health is the top priority. For a successful restart of social life, clinics need sufficient protective equipment and beds – medical capacities so that doctors can care for patients. The return to normality is “a question of judgment and not a trade-off between human life and the economy,” says BayerChief Werner Baumann.

Lufthansa aircraft park in Frankfurt

In a previously unpublished paper, the Institute for Research on Small and Medium-Sized Enterprises calls for the exit from shutdown to be handled with particular care. You only have one attempt, after that there is no turning back. The start-up of the economy had to be flexible in phases and regionally. Priority should not be given solely on the basis of the economic contribution, but on how quickly a company can start operating again – and how important the products are for everyday life.

Corporations like Volkswagen, Salzgitter or airbus have plans for the restart already in the drawer. But the new era cannot be planned in detail. In many cases, the supply chains are too complex and complex, and hardly anyone can say when they will function smoothly again.

An important first step would therefore be the end of border controls in the European Union, says Gabriel Felbermayr, President of the Institute for the World Economy.

BCG and McKinsey management consultants unanimously demand that companies need a time perspective for the restart as early as possible. Because they have to prepare their company and their supply chains with a lead of several weeks or even months. The earlier the restart in the supply chain can be communicated, the better.

Business unrest

CEO Herbert Diess has been stuck in Wolfsburg for some time. With the exception of one machine, VW keeps its entire aircraft fleet on the ground. No employee should be infected on the otherwise regular commuting flights within VW’s own network.

In general, travel activities at the global corporation have been suspended since March 16. This remains at the headquarters and no longer commutes to his family on weekends in Munich, as in the period before the crisis.

If the management conference, then only in large rooms. “We will then be seated with enough space between us,” says VW HR Manager Gunnar Kilian. Most of the time, however, the panel joins in via video. “This is the best protection,” says one of them. competitor Daimler leaves his board of directors in two groups to avoid taking risks.

No economy in the world can endure such a state of emergency in the long term. Werner Baumann (CEO Bayer)

Caution is a must: a number of top decision-makers had to go into quarantine because they had come into contact with people infected with corona. Especially in times of crisis, an illness at the top of the company can have fatal consequences.

Also Osram-Chef Olaf Berlien has almost stopped working. Despite the corona crisis, he goes to the office every day and wants to show presence. Most employees in the administration in Munich city center wear gloves and protective masks. Berlien himself, he wants to create trust. But business is getting more and more difficult. The demand for lighting technology is weak, six of the 26 Osram factories are shut down.

The CEO sees the Federal Government’s measures in the fight against the corona virus as appropriate. But it is also clear that “we cannot keep the stores and factories closed for three months. We have to start up again as soon as possible. ”

Berlien is not alone in such considerations. “We need a good strategy when and how we can return to a regular, normal everyday life,” says Bayer CEO Baumann. “No economy in the world can endure such a state of emergency in the long term.”

The infection had to be managed, fellow citizens with special risks had to be protected – so that large sections of the population could go about their everyday lives again. “How exactly that can be done has to be analyzed very carefully and made responsibly,” says Baumann.

Support comes from politics. “We now have to give people and companies a perspective on when we will gradually loosen which measures,” says Carsten Linnemann. If it is up to the chairman of the middle class and economic union of the CDU / CSU, then in the weeks after Easter “under strict conditions” production should start up again, transport routes should be easier and some of the shops should be opened.

The federal government can only answer the big question of when Germany will flip the switch again in consultation with the federal states. A decision could be made on Tuesday after Easter during the conversation between Merkel and the Prime Minister.


Corona pandemic: slump in oil prices weakens US economy

new York The situation was “just sobering” two weeks ago, Dan Eberhart recalls. The head of Canary Oil, an oil service provider from Denver, Colorado, fired the first 40 employees at the time and hoped desperately for a signal from the White House. But since then the situation has deteriorated dramatically. “The whole industry will soon jump over the cliff,” he believes. “We just don’t know where the floor is.”

The oil price has dropped to its lowest level in 18 years this week. Hardly anyone is driving a car these days, airlines are canceling their flights on a grand scale. The oil producers are not only struggling with the slumping demand in the corona crisis. They also suffer from the oversupply because Saudi Arabia and Russia are currently flooding the market with oil in a price war.

Trump announced on Thursday that Russia and Saudi Arabia would cut production, which caused the oil price to skyrocket again.

What would particularly delight drivers in normal times is currently endangering the American dream of independence in energy supply. It was above all the controversial fracking that enabled the United States to significantly increase its domestic production and thus become an oil exporter and thus independent. However, the costs for this type of production are high and are no longer worthwhile given the low oil prices on the world market.

Lydia Boussour, economist at Oxford Economics, predicts: “The oil price crash has a negative impact on the US economy.” If the oil price decline persists, the American economy will cost around 0.2 percent of GDP.

“Destruction of Demand”

Already last year, when the price of oil fell but was still far from today’s level, the problems worsened for many companies. According to Hayes and Boone’s, a law firm specializing in energy and restructuring, a total of 50 oil companies applied for bankruptcy protection – including 33 oil and gas producers and 15 service providers for oil fields.

Even the big names like Chevron and Schlumberger from Texas announced billions of dollars in depreciation. They are also reducing their investments in shale – in other words, in fracking funding.

The low oil price has also brought the US President on the scene. He wants to meet with the CEOs of the largest oil companies on Friday to discuss ways out. Various options are likely to be negotiated: Will there be government aid to the US oil industry? Or are punitive tariffs on oil from Saudi Arabia conceivable? Among other things, the state could buy and store oil. The oil companies were left out of the latest aid package.

The meeting is scheduled to take place on Friday at the White House. According to the report of the “Wall Street Journal”, CEO Darren Woods from Exxon Be mobile, Mike Wirth from Chevron, Vicky Hollub from Occidental petroleum and Harold Hamm from Continental Resources. The news of the meeting alone boosted the oil price on Wednesday.

Loud Goldman Sachs the new oil price war is “not just the biggest economic shock of our life”. The oil industry is “in the crosshairs”. And this at a time when the coronavirus is already making things difficult.

“This destruction of demand is catastrophic for us,” says the head of Canary Oil about the effects of the corona crisis. His company is an oil field service provider that carries out oil field drilling for customers in the oil and gas industry, rents fracking equipment and offers maintenance and repairs.

The oil manager has been at the head of Canary Oil for 15 years and is well wired to the White House. He has been collecting donations for Republican senators for years and regularly calls Trump’s economic adviser Larry Kudlow.

He already had the President himself on the phone. Most recently, he appealed to the White House on the CNBC: “Trump should actively try to solve the problem with Russia and Saudi Arabia.”

Eberhart, who is active in major oil states in Colorado, North Dakota and Oklahoma, is seeing a number of companies shut down capacity, fire people, draw lines of credit.

Colorado’s friting company Whiting Petroleum had used its entire $ 650 million credit facility last week to be on the safe side. That should actually help service the outstanding bonds. As early as Wednesday of this week, however, the company had to apply for bankruptcy protection.

Funding at a record level

Eberhart is also in negotiations with his banks. The companies in the oil industry are notorious for their high levels of debt. “Many did not recover very well from the last slump in oil prices in 2014,” explains Eberhart. “Hardly anyone has a buffer for bad times.”

In addition, storage capacities are becoming scarce across the country. “For the first time ever, we don’t have enough,” says Eberhart. Regulators in Texas are therefore considering officially reducing production capacity for the first time in decades.

The prices for storage on ships have quadrupled. Storage prices in tanks in Cushing, Oklahoma, have also doubled in the past three weeks. Eberhart is convinced that this could lead oil producers to reduce their capacities.

So far, however, there has been no sign of a capacity shutdown. Despite the low oil price and high storage costs, the US oil companies have recently produced record quantities of oil so that they do not have to accept a drop in sales. According to the Energy Information Administration, the US oil industry has continued to produce 13 million barrels of oil a day.

That is only slightly below the record production volumes of the past. The demand for oil does not justify this: it fell from 8.8 million barrels to 6.7 million barrels a day last week. A year ago, demand was 9.2 million barrels.

“Right now we have a supply and a demand problem,” explains Helima Croft, head of RBC Capital Markets’ global raw materials strategy. She estimates that as more states call on citizens to stay at home, demand will drop to 6.2 million barrels a day.

More: The battle for the oil price: how are Saudi Arabia and Russia positioned?


Corona Crisis Exposes US System Failure & Changes Country

Only a folded cardboard card in the low conference room indicates who the place is for. “The President” is written on it. Behind it sits Donald Trump, leaning back, arms folded, his favorite pose. Here, in the headquarters of the US civil protection agency FEMA, Trump can be seen in his new role for the first time in mid-March: as crisis president. The governors of the 50 US states are switched on one after the other via loudspeakers.

Bravely they present their wishes to the President. Brian Kemp from Georgia hopes that the power of command over the National Guard will remain with the states even during the corona crisis, “because we know best what is going on in our country.” Trump replies: “I like your idea, Brian, consider that a decision.” And then: “The next governor, please!” Trump has found a new role. That of the leader in the “war against the virus”.

What else is there for him? Trump’s initial downplay of Covid-19 lung disease no longer fits the harsh reality. In Corona Hell New York, forklifts are now hauling the dead in refrigerated trucks. There are hospital tents in Central Park to accommodate the sick – the last time it happened in the civil war was over 160 years ago.

How bad the supply of protective masks and respirators is, can be seen on the night of Wednesday, when Trump accepted relief supplies and experts from Russia. “That cannot be true,” said Russian expert Andrew Weiss from the Carnegie Endowment for International Peace in the United States.


While the corona pandemic has abated in China and has presumably reached its peak in Europe, it is overwhelming the United States. No other country in the world has so many infections. In no other country in the world do so many people die. The Corona Task Force of the White House expects up to 240,000 deaths. The climax is expected with up to 3500 deaths per day around Easter – more than two people in the United States will lose their lives every minute.

With the term “China virus”, Trump not only started to upset China, but also suggested that this is a problem for others. The United States gave away valuable weeks in which they could have learned from the experiences in Asia and Europe. In which the rather ailing US health care system could have prepared for the onslaught of the corona patients and in which the economic consequences of the pandemic could have been mitigated.

“In the United States, we have had the worst of both worlds so far: an economic crash and a rapid spread of the virus,” says Maurice Obstfeld, former IMF chief economist.

The economic crisis comes to the health catastrophe. Compared to Europe, the less regulated US labor market responds more quickly to the situation. The unemployment curve is similar to an ECG of a heart attack, 3.3 million people registered without a job last week, twice as many this week.

Empty Broadway in New York

The city is the center of the US corona crisis.

(Photo: imago images / Bildbyran)

According to the investment bank Goldman Sachs The unemployment rate in the USA will skyrocket to 15 percent by the middle of the year, and the effects of the three Corona aid packages to date have already been included.

With unemployment, consumption collapses, with almost 70 percent a pillar of the gross domestic product (GDP). “The United States will plunge into a deep recession that is so unusual that statisticians may never agree on exactly what percentage production slumped,” warned Harvard professor Kenneth Rogoff. “Our system for calculating GDP is simply not designed for this kind of sudden stop.” He assumes that the slump in the second quarter will be up to 25 percent.

The US economy is particularly hard hit by the low oil price. It would have been a welcome help in the past, given that Americans spend less on gasoline and heating oil. But the country blossomed into international oil power with fracking. Now the new industry is facing ruin – and pulling the economy down.

There is a lot of talk in the United States about the situation with which the situation is most comparable. With the financial crisis of 2008? With the Spanish flu of 1918? Or even with the Great Depression in the early 1930s? Nobel laureate in economics Robert Shiller sees this as a “worst case scenario” for the possible consequences of the corona pandemic in the USA.


In fact, there is another parallel: Pearl Harbor. The surprise attack by the Japanese on the headquarters of the U.S. Pacific Fleet in 1941 hit a nation that could have known better. But the war raging across the oceans in Europe and the Far East seemed far away. An illusion that only died with Pearl Harbor.

Even in the corona pandemic, the United States has long deluded itself: that the pandemic would miraculously remain confined to Europe and Asia. That she could be kept away from the United States with entry bans. On March 9, Trump still saw that Corona was no more serious than a flu wave.

Six days later, the White House recommended a nationwide shutdown. The pandemic strikes a superpower that is just as unprepared as the 1941 attack by the Japanese. With deadly brutality, the virus exposes the weaknesses of the economic and social system:

  • In the crisis, the US social system is more like a fire accelerator than a safety net. Anyone who falls ill or is released in the USA is quickly at risk of ruin. It is not only hard for those affected. It also intensifies the crash of the overall economy and there is a lack of so-called automatic stabilizers. With hasty economic stimulus packages, politicians are trying to compensate for this shortage and to provide social benefits that are a matter of course in other industrialized countries, such as continued wages in the event of illness.
  • The American groups are world leaders in their stock market valuation. But in the crisis it becomes clear that this is often based on the art of illusion. Many companies have used the low interest rates of the past decade to get into debt. However, this money was mostly not used for future-oriented investments, but to distribute high dividends and buy own shares from the market and thus drive the stock market price. Now that sales break down in the shutdown, companies lack financial reserves. The state has to bail out the corporations with aid loans.
  • The struggle against the disaster is aggravated by a political system in which distrust dominates: Democrats against Republicans, governors against Washington. And above all a president who for a long time was not guided by facts, but by emotions, survey values ​​and ratings.

1. The social system: Even in the crisis there is an up and a down

Corpse transportation in Brooklyn

The health system is overworked.

(Photo: Shutterstock)

“Hang Tough, South Slope!” The residents of the Brooklyn house posted in their windows. “Hold on!” That is the motto with which the hard-boiled New Yorkers are trying these days to brave themselves against the rapid spread of the corona virus.

New York has long since become the largest source of fire in the world. The number of people who test positive in the city increases by thousands every day. More than 45,000 people have contracted Covid-19 and nearly 1,400 have died. The silence in the streets is increasingly interrupted by the sirens of the ambulances.

In Central Park, a field hospital made of white tents welcomes the Covid 19 patients, the Mount Sinai Hospital on the Upper East Side is no longer up to the rush. “I have already set up field hospitals like this in war zones and after earthquakes. But I never expected to ever have to build one in Central Park, ”said Elliott Tenpenny, doctor and team leader of the Christian charity Samaritan’s Purse.

New York doctors and nurses report that they have to wear their masks and suits for five layers, occasionally disinfected with spray. A doctor outraged spread the image of a rain poncho with “New York Yankees” on Twitter. The cloak, originally intended for spectators at baseball games, was given to her at the beginning of her shift in the hospital as protective clothing.

New York took the right measures, but too late. Rice Powell (CEO Fresenius Medical Care)

Rice Powell is optimistic that New York can cope with the situation thanks to the new makeshift hospitals. He has to be the boss of Fresenius Medical Care (FMC) know. The German company operates a total of 80 dialysis centers in the state of New York, many in New York City. Ten percent of these are isolation centers for corona-infected patients.

“We saw what happened in China, Italy and then Spain,” said FMC CEO Rice Powell. “That’s why we applied our pandemic protocol early and ordered protective clothing.”

The FMC boss is convinced that the US could have reacted earlier. “As a country and as a city of New York, we weren’t sufficiently prepared with the hospitals,” Powell says. “New York took the right measures, but too late.”

The catastrophe is now here, and anyone who can afford it leaves the city. Short-term rental prices for beach houses in the Hamptons have quintupled in recent weeks, brokers report.

Robin Mayer is a New York billionaire who prefers not to read his real name in the newspaper. He and his wife have retired to his luxury property in the US state of Wyoming. “So we can hold out for a while,” he says. The fridges are full, he got masks weeks ago.

“Now we just have to wait,” he says. “Sure, a few things will change permanently, but there will still be capital markets after Corona and it will continue. In two to three years, this will only be a small dent in a graphic. ”

Medical ship in New York

Aid is needed, as was the case in the 2001 terrorist attack.

(Photo: Brendan McDermid)

New York film producer David Geffen was less discreet than Mayer. Last week he caused a wave of outrage when he published photos of his super yacht “Rising Sun”. The billionaire in the Caribbean wants to sit out on the pandemic. “I hope you all stay safe,” his greeting ended on Instagram, which earned the billionaire so many angry reactions that he deleted his account.

Not all super-rich are as instinctual as Geffen. With his foundation, Bill Gates is providing $ 100 million to fight the virus. Michael Bloomberg donates $ 40 million to fight Corona in Africa.

But such benefits tend to go under. “More than half of the US stock is in the hands of the richest one percent,” criticizes Robert Reich, who was Secretary of Labor under President Bill Clinton and now teaches at the University of California at Berkeley.

The super-rich would therefore not see the corona virus as a health and social crisis. “After all, you are not exposed to the risk of infection like nurses, doctors and delivery men every day.” In Reich’s eyes, the problem for super-rich people is reduced to the question: “How can we get share prices up again as quickly as possible?”

I have already set up such field hospitals in war zones. But I never expected to ever have to build one in Central Park. Elliott Tenpenny (doctor and team leader Samaritan’s Purse)

The further down one looks in the income and wealth scale, the more the pandemic raises another question: How can I survive Corona without ruining myself financially? “We cannot say that we have a functioning health system,” Reich said on Tuesday with an online reading. “We are the richest country on this planet. It’s a shame.”

Since the health care reform under President Barack Obama (“Obamacare”) ten years ago, all US citizens have the right to health insurance without a prior health check – a huge step forward for US standards. But not everyone has such insurance, and even if: What benefits are covered by the individual policies and what additional payments are incurred can hardly be overlooked by the insured.

This leads to extreme burdens even in normal times – around 60 percent of private bankruptcies in the USA are due to invaluable hospital bills. Some, but by no means all insurance companies have announced that they will waive the excess that would otherwise be due for corona treatments.

With their aid packages hurriedly put together, politicians are now rushing to introduce social benefits that are a matter of course in other industrialized countries. For the duration of the corona crisis, most US employees are now guaranteed 14 days’ wages in the event of illness or if quarantine threatens.

In addition to the unemployment benefits that individual states pay in the United States, unemployed people are to receive $ 600 a week from the federal government’s fund. But even that only for the next four months, the measure against the corona crisis should under no circumstances become a permanent social benefit.


The United States now even has a kind of improvised short-time worker regulation. Smaller companies can apply for aid loans that they do not have to pay back if they keep their workforce on board during the crisis.

This does not help corporate employees. The Macy’s department store chain wants to put the majority of its 125,000 employees in front of the door, as does the Gap clothing chain with 129,000 employees. There is no statutory protection against dismissal that could delay such mass layoffs or make them more socially acceptable.

America remains a class society even in the Corona emergency. This is also shown by the fact that the health crisis in the world financial capital of New York is taking place under the eyes of the digital and media public, who mourn every missing protective cape and cheer every new field hospital – while 770 kilometers further west, people die much more quietly.

Detroit, the run-down auto metropolis, is on its way to becoming the new corona hotspot in the United States. The number of infected and dead people increases particularly rapidly here and in the neighboring communities. One third of Detroit’s 673,000 residents live in poverty. Many have pre-existing conditions that make the virus particularly dangerous for them.


Interview: Economist Obstfeld: “We have to avert a social breakdown”

The former IMF chief economist warns of a severe economic downturn due to the spread of the corona virus. He accuses the US government of leadership failure. .

Corona pandemic: is the next euro crisis coming?

Olaf Scholz currently has to help not only the German economy, but also his voice. When the federal finance minister first held a video conference with his colleagues from the G7 countries and later with his European colleagues on Tuesday, there was cough syrup first.

The small bottle “Bronchicum Elixir” is at hand on his desk, a little out of the way from the video conference camera. On the other side of the desk is a pack of Ricola sweets, of the “Swiss herbal sugar” type, which the SPD man uses extensively.

Scholz has been suffering from a severe cold for days. Nevertheless, he has to endure the many phone calls. Already when he presented the gigantic corona rescue packages in a conference call with budgetary and economic politicians of the Bundestag on Saturday evening, some figures were lost in the cough of the minister.

Later, the MPs heard in the background how Scholz started the coffee machine at home. The minister has long working days and hardly gets any sleep.

Olaf Scholz’s lifestyle is certainly not healthy. And it is far from just the critical state of the German corona-plagued economy that is depriving the minister of sleep. It is above all the state of emergency of the southern European economies that drives him. Because there is a risk of a whole new dimension. A crisis that could overshadow the euro debt crisis that broke out ten years ago and has not yet been resolved.


If even Germany faces a 20 percent slump in economic output due to the state-prescribed forced shutdown, as the Munich Ifo Institute presents in its worst-case scenario – what does that mean for the economies of the south, which are much weaker anyway?

For example Italy, which has grown in the past decade, if at all, only in homeopathic doses and carries a mountain of debt of 2.4 billion euros, that is, 130 percent of its economic output.

What does it mean for Spain, which is still struggling with the aftermath of the burst real estate bubble after 12 years and has unemployment of 13 percent, among younger people even 30 percent? Or for Greece, the hopelessly over-indebted country that triggered the euro crisis and still has by far the highest debt ratio with 175 percent of its economic output and despite several debt cuts.

If the corona pandemic continues for several months, these countries will no longer be able to free themselves from the crisis on their own. Eight years after the high point of the euro debt crisis, the collapse of the currency union threatens again.

At that time, the euro could only be saved because Mario Draghi, the recently resigned head of the European Central Bank (ECB), held the monetary community together with unorthodox and controversial actions.

Night meetings at the ECB

It’s that time again. Draghi’s successor, the French Christine Lagarde, had to avert attacks by speculators on the weakest members of the monetary union. The central bank decided on a pandemic emergency purchase program (PEPP) of 750 billion euros after the yields on ten-year Italian government bonds shot up from less than one to more than three percent within a few weeks.

Together with the ongoing bond purchase program, the central bank will have a purchase volume of EUR 100 billion by the end of 2020 – monthly.

Again, it was an extraordinary night meeting for the ECB. Again it was a declaration of guarantee – based on the legendary “Whatever it takes” speech by her predecessor in London in 2012 at the height of the last euro crisis. The central bank did not have to act again until Thursday.

This time, she lifted the limits for her new purchase program. So far, the ECB has not been allowed to buy more than a third of a country’s outstanding bonds according to its own limits. The Frankfurt monetary authorities have now removed this limit.

The intention is clear: the central bank, which already has Italian bonds worth 370 billion euros in its books – this corresponds to 18 percent of the total volume of Italian bonds – wants to keep all options open: for emergencies.

Christine Lagarde (ECB chief)

“We will do everything within our mandate to support the euro area in this crisis.”

(Photo: imago images / Xinhua)

The tragic thing about this new crisis triggered by a virus: Again, the weakest members of the euro zone are hit hardest. The number of people infected with corona in Italy has now risen to 74,000 and the death toll to more than 7,500.

To stop the pandemic, the government in Rome put the country in a kind of artificial coma – only “systemically important companies” are allowed to produce. A total standstill of almost the entire economy over weeks, maybe months – when has there been such a thing?

The pictures of the human tragedies that can be seen every day in Italy could also be available in Spain in a few days. The country now mourns 2323 deaths – the number of infected is 49,000.

The south needs the solidarity of the north – it needs humanitarian and above all financial support. Neither Spain nor Italy can afford massive stimulus packages to support the economy, as the Bundestag has just passed – a total of EUR 1.2 trillion.

The national debt of the third largest economy in the currency area amounts to a gigantic 2.4 trillion euros – that is almost a quarter of the total euro zone debt. There is also a government debt in the amount of economic output in the Spanish state.

The third or fourth largest economy in the euro zone will not make it on its own: “If the countries are heavily indebted, there could be a collapse of trust,” warns Ifo boss Clemens Fuest. That applies above all to Italy.

“The countries of the euro area, including the ECB, must clearly signal that all countries are consistently supported and defaults in government debt are excluded,” warns the conservative economist. Now “drastic measures are required”.

Guntram Wolff, director of the Bruegel economic research institute, also warns: “Italy can still face difficulties on the bond markets.” The euro zone urgently needs to “take countermeasures to avoid speculative attacks against southern European countries”.

Little common ground

But reality looks different. First there is a fight. Small-scale states and not the search for a common solution dominates the political talks between the government centers in Europe. Boundaries are closed without prior agreement, export stops for protective masks and oxygen devices are imposed, without even informing the affected countries. The single market, the greatest achievement of European integration – it no longer exists.

Confrontation instead of cooperation – that is the mood among Europe’s crisis managers. Her irritability is due to the fact that this crisis is of a completely new quality – not only in terms of its global spread and the incredible dimensions of the economic damage it is causing. The means to fight this crisis have never existed before.

Handelsblatt Morning Briefing - Corona Spezial

In their emergency, the EU finance ministers completely overturned the European Stability Pact last Monday, for the first time in the history of the euro. The EU limits for government deficits (three percent of gross domestic product) and for total debt (60 percent of GDP) no longer apply – overnight.

That alone is a small revolution. For decades, the Europeans had struggled for this pact to finally put their monetary union on a stable footing.

Now there is one national bailout package after another. Who pays the bill in the end? Everything open. The Eurogroup puts the previous support measures and guarantees at 13 percent of the euro zone GDP. That is more than 1.5 trillion euros.

However, national debt is already weighing more than ten trillion euros in the euro zone. The nervousness in the government palaces and the switching centers of the EU is growing.