Merkel coalition agrees on new S$15.4 billion coronavirus crisis package
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Germany's ruling parties had bickered over how fast to provide further support for the Europe's largest economy.
PHOTO: REUTERS
BERLIN (BLOOMBERG, REUTERS) - Germany's ruling coalition agreed on a 10 billion-euro (S$15.4 billion) package of further measures to dampen the economic impact of the coronavirus crisis, as party leaders settled differences over how to tackle the next stage of the pandemic.
Chancellor Angela Merkel and coalition leaders sealed an accord to temporarily reduce value-added tax for restaurants and increase the amount of money paid as state wage support as part of a seven-point plan to fine-tune the government's crisis response. The agreement came after almost eight hours of wrangling in the chancellery in Berlin.
Finance Minister Olaf Scholz said wage support measures played a key role during the financial crisis just over a decade ago in protecting German jobs while other nations suffered and that extending the program will make the economy more resilient.
"We are making the system more stable to cope with the crisis and that will help us get through the long period we will need to get a grip on the virus," Scholz said in an interview with ZDF television on Thursday. Reducing sales tax for restaurants will help give businesses planning security, he added.
The ruling parties had bickered over how fast to provide further support for the Europe's largest economy, which has been hit hard by the fallout from the pandemic. Merkel's Christian Democrat-led bloc at first pushed back against immediate new stimulus measures demanded by its Social Democratic partner.
But with the agreement, Germany's grand coalition - which seemed to be coming to an end only a few months ago - set aside differences to show a united front.
The government has won widespread praise for its decisive response to the pandemic's fallout after it swiftly implemented an 1.2 trillion-euro rescue plan to provide businesses with liquidity and aid the battered economy.
The number of new coronavirus cases rose for the second time in five days, data from Johns Hopkins University showed on Thursday. There were 2,195 new cases, pushing the total above 150,000 and fatalities rose by 229 to 5,315.
The new measures come as Europe's biggest economy is facing a deep recession. The government expects output to decline by at least 5 per cent this year, and the country's public-sector deficit will likely widen to more than 7 per cent of gross domestic product due to extra spending to tackle the crisis.
Merkel on Thursday urged Germans to show endurance and discipline to get through the coronavirus pandemic that is "still at the beginning", and called for a bigger European Union budget to support economic recovery in the bloc.
She is worried that Germans are slacking off their social distancing efforts after the federal and regional governments agreed to reopen shops this week.
Germany has the fifth highest Covid-19 caseload behind the United States, Spain, Italy and France, but has kept fatalities down, thanks to early and extensive testing.
"It is precisely because the figures give rise to hope that I feel obliged to say that this interim result is fragile. We are on thin ice, the thinnest ice even," Merkel told the Bundestag lower house of parliament.
"We are still far from out of the woods," she said, warning: "We are not living in the final phase of the pandemic, but still at the beginning."
She is worried that Germans are slacking off their social distancing efforts after the federal and regional governments agreed to reopen shops this week.
Germany has the fifth highest Covid-19 caseload behind the United States, Spain, Italy and France, but has kept fatalities down, thanks to early and extensive testing.
"It is precisely because the figures give rise to hope that I feel obliged to say that this interim result is fragile. We are on thin ice, the thinnest ice even," Merkel told the Bundestag lower house of parliament.
"We are still far from out of the woods," she said, warning: "We are not living in the final phase of the pandemic, but still at the beginning."
Germany's gradual easing of restrictions provides for social distancing rules to remain in place until May 3. Schools will start opening from May 4, with priority for final-year students. Hairdressers can also reopen then.
Merkel and state leaders will meet again on April 30 to review how to proceed after May 3.
"If we show the greatest possible endurance and discipline at the beginning of this pandemic, we will be able to return to economic, social and public life more quickly and sustainably," Merkel said.
Turning to the EU's response to the economic impact of the virus, Merkel said calls from some EU countries for common debt with common liabilities were not the right way to go.
"That would be a very difficult process, cost time and wouldn't even help anyone in the current situation, since we need rapid-fire instruments to tackle the crisis," she said, instead calling for a European economic package aimed at supporting an upswing in the coming two years.
"Our consultations today won't yet be about nailing down details or deciding on the extent but one thing is already clear: In the spirit of solidarity, we should be prepared - over a limited period of time - to make very different, meaning much higher, contributions to the EU budget," she added.
"If we show the greatest possible endurance and discipline at the beginning of this pandemic, we will be able to return to economic, social and public life more quickly and sustainably," Merkel said.
Turning to the EU's response to the economic impact of the virus, Merkel said calls from some EU countries for common debt with common liabilities were not the right way to go.
"That would be a very difficult process, cost time and wouldn't even help anyone in the current situation, since we need rapid-fire instruments to tackle the crisis," she said, instead calling for a European economic package aimed at supporting an upswing in the coming two years.
"Our consultations today won't yet be about nailing down details or deciding on the extent but one thing is already clear: In the spirit of solidarity, we should be prepared - over a limited period of time - to make very different, meaning much higher, contributions to the EU budget," she added.
