Our country is facing a challenge unlike any it has experienced since the Federal Republic of Germany was founded. The coronavirus has changed our lives. The impact on our personal lives, jobs and the economy is enormous. The top priority is to slow the further spread of the virus and to ensure the best-possible medical care for those who are ill. At the same time, it is essential to keep the economic impact of the pandemic as small as possible and to ensure that jobs are preserved. The German government took immediate action to do this. And it will continue to deploy all its capabilities to do what is necessary. We are creating a protective shield for employees, the self-employed, and businesses by introducing a comprehensive package of measures of historic proportions.
As early as 13 March, the German ministers of finance and of economic affairs presented far-reaching measures to provide liquidity assistance. Companies will have easier access to cheap loans to help them make it through the crisis. To this end, we are using Germany’s national development bank KfW, which will act as a partner to companies’ local banks to make the necessary programmes available. We have massively expanded the relevant programmes and increased government guarantees accordingly. Companies can now apply to their banks for these loans. At the same time, we are providing assistance for businesses in the area of taxes. The most important measures include a) allowing taxpayers to defer tax prepayments without incurring interest, b) giving taxpayers the option of easily reducing the level of their prepayments, and c) suspending enforcement measures.
Today, the German cabinet has initiated additional extensive assistance measures to expand the protective shield and make it more effective. German Finance Minister Olaf Scholz made it clear at the beginning of the crisis that the German government would use all the resources at its disposal to protect employees, the self-employed and businesses. The measures that were agreed today continue to implement this promise.
- Immediate assistance for small businesses, the self-employed and freelancers: Sole traders, microentrepreneurs and small family businesses in particular might quickly face problems that threaten their very existence as a result of the current situation. Even though their revenues are collapsing, they still need to cover their operating costs such as rental or leasing expenses. Any reserves will be quickly exhausted, and often these businesses do not have access to new loans. Our immediate action programme will provide the self-employed and businesses that have up to five employees (full-time equivalents) with a one-off payment of up to €9,000 to help them cover their expenses for a period of three months. Companies with up to 10 employees (full-time equivalents) will be provided with a maximum of €15,000. The money is intended to help businesses cover their rental and leasing costs in particular. The programme will be implemented via the Länder, many of which have set up their own assistance programmes which can be combined with the federal assistance. The federal government is making €50 billion available for this immediate assistance. We are also amending insolvency rules. Businesses that experience cash-flow difficulties in the coming months due to the coronavirus will not have to declare bankruptcy for the time being.
- Self-employed individuals will get easier access to basic income support so that they can support themselves and pay their rent during the crisis despite their lost earnings. In the coming months, applicants will no longer be required to disclose their income and assets, and they will not need to first use their own assets to cover living expenses. They will also be allowed to stay in their current homes; there will be no requirement to move to cheaper accommodation. These exceptions will apply for six months. The benefits will be provisionally approved and paid out very quickly.
- Stabilising the real economy: The coronavirus pandemic is creating enormous uncertainty in the real economy. Widespread bankruptcies among large companies would have significant social and economic effects. For this reason, the federal government has set up a fund to stabilise the economy. This will enable large-scale support measures to be taken, in addition to the liquidity assistance via KfW programmes that has already been agreed. These measures will include government liquidity guarantees and steps to strengthen companies’ equity. The new fund will be able to acquire shares and other equity instruments in companies. The fund will rest upon the established structures of the Financial Market Stabilisation Fund, which was set up during the financial crisis. Effective controls (including parliamentary controls) on the use of public funds will be ensured. In the event of the fund investing in equity instruments, stabilisation measures such as limits on remuneration, rules on dividend distributions, and the use of funds which have been received can be enforced. The fund will be provided with €100 billion for equity measures and €400 billion for liquidity guarantees. In addition, the fund will be able to refinance the KfW programmes that have already been agreed with up to €100 billion. In this way, the German government is safeguarding thousands of jobs.
- Safeguarding families’ incomes: We want to prevent a situation where families have to worry about jeopardising their income if they follow official instructions. The federal government has therefore decided to partially offset the loss of income for employees who are unable to work, or can only work part of the time, due to official closures of schools or childcare facilities. This decision must still be approved by the Bundesrat, however. Self-employed individuals can also benefit from the compensation if they have lost income due to school or childcare closures. In addition, we are making it possible for families whose income is lower as a result of working short-time to get easier access to the child supplement for low-income families.
- Creating security for renters and consumers: The federal government is taking steps to ensure that people are not in danger of losing their homes or business premises due to sudden losses of earnings. For the time being, rental contracts may not be terminated if rental payments are late. The provision of basic services (including electricity, gas, telecommunication services and – to the extent that services are covered by civil law – water) will also be protected; companies may not deny consumers these services if payments are late due to the crisis.
- Guaranteeing healthcare provision: The pandemic is having a massive economic impact on hospitals. They need to urgently keep capacity free for the expected increase in the number of coronavirus patients, and they need to hire extra staff. The federal government is setting up a “protective shield for hospitals” which will offset the loss of income and higher costs. In addition, hospitals will receive a bonus for every additional intensive care bed which is created and kept ready. Doctors with their own practices will also have their lost earnings mitigated. In addition, the federal government is making an additional €3.5 billion available for health-related measures including a) central procurement of personal protective equipment, b) funding for development of a vaccine and treatment, c) support services provided by the Federal Armed Forces in relation to the pandemic, d) assistance for German and EU citizens abroad in connection with the coronavirus crisis, and e) communication activities to keep the population informed. The Federal Ministry of Labour and Social Affairs will be able to issue exceptions to labour law in the future, with the aim of reacting to the immense demands being placed on critical professions and to ensure public safety and the provision of essential services. Finally, the Federal Ministry of Health will be given the capability to declare in future an epidemic situation of national importance and to take far-reaching national safety measures.
The federal government is deploying enormous financial resources for the economic protective shield. At the same time, tax revenues will be lower than expected due to the pronounced economic slowdown that is anticipated. For this reason, the federal government is being given the capacity to take on new borrowing up to a total of €156 billion. This is permissible under Germany’s constitutional debt rules because the pandemic is an emergency. A corresponding supplementary budget will already be debated by the Bundestag and Bundesrat this week. The supplementary budget also includes €55 billion for any additional measures that may be necessary to fight the pandemic. This will enable the government to continue to react decisively in the coming months. Germany has the fiscal leeway to take vigorous action to address this crisis, partly because of the sound fiscal policies it has pursued in recent years. We will use this leeway to resist the coronavirus crisis as best we can. We will also coordinate closely with our European and international partners, as the pandemic can only be defeated if we act as a global community. For us Europeans, this means that we must act with determination and also deal appropriately with the fiscal rules that we have set for ourselves. To this end, we are in close contact with our European partners as well as with the European Commission and the European Central Bank.