How Germany tries to avoid an economic crash
The latest economic data. The Lufthansa dossier. Fears about public finances and economic prospects in Germany. The in-depth study by Pierluigi Mennitti from Berlin
It was also the growing numbers of Covid 19 infections in Europe and the fears of new lockdowns following the second wave of the pandemic that dragged down all the world stock exchanges. The summer of light-heartedness and rediscovered parties is over, writes the Handelsblatt today. In Germany, where the increase is even less pronounced than in other European countries such as France and Spain but no less worrying, the chancellor has called an extraordinary summit for next Tuesday, with competent ministers and presidents of the Länder. A meeting in the format known in the first phase of the emergency. This time, also on the basis of the accumulated experience, everything will be done to anticipate developments and avoid a second generalized lockdown, which would have catastrophic consequences for the economy, hitting it again just at the moment in which it is trying to recover.
NEW ESTIMATE BY IFO: 2020 GDP at -5.2%
The data provided in the morning by the Munich Ifo economic institute certify this. The new autumn forecasts confirm the impressions of recent weeks , according to which the recovery of the German economy is more agile and robust than was feared a few months ago. The updates on the GDP estimate now indicate a decline of 5.2% for 2020, one and a half points less than the – 6.7% estimated in the summer forecasts.
“The decline in the second quarter and the recovery in the following quarter are currently more favorable than we expected,” said Timo Wollmershäuser, chief financial officer of the IFO. The recovery of the point and a half of GDP will naturally also affect the forecasts for the next few years, attenuating the recovery that was indicated in the summer. Munich experts now predict economic output growth of 5.1% for 2021 instead of the previous 6.4. GDP growth of 1.7% is expected in 2022.
UNEMPLOYMENT AT 5.9%, LUFTHANSA CUTS AGAIN
These are important numbers, which give confidence to the economy and which push the government to always seek new balances between the need to restore a normal life to citizens and businesses and to preserve health protection. The two go hand in hand, because if the country cannot afford a new lockdown, it cannot afford a health catastrophe.
Economic forecasts reflect this pincer. “The uncertainty of the prospects remains very high”, added Wollmershäuser, “because no one can imagine at the moment how the pandemic will evolve”. In addition, all the other uncertainties that had already engulfed the German economy before the appearance of the virus remain on the table: Brexit, for which it is not known whether there will be a shared solution with Great Britain or a rupture, and the trade wars (between the US and China) that have numbed Berlin's exports.
Other data provided by the Ifo concern the state of employment. The pandemic crisis has cost 400,000 jobs at the moment, a damage limited by the government's support measures (reduced hours) recently still extended to next year. The number of unemployed went from 2.3 million to 2.7 million in one year, from 5 to 5.9%. But even in this field, the future remains uncertain: companies receive news of restructuring strategies and job cuts every day. Yesterday Lufthansa announced 5,000 additional layoffs that add up to the previously planned 22,000. And we need to understand what will happen to sectors such as tourism and gastronomy, for which a recovery promises to be much slower.
However, the IFO remains moderately optimistic and expects a recovery in employment as early as next year: the share of unemployed should fall to 5.7% in 2021 and 5.5% in 2022. However, it will not be enough to recover the pre- Covid.
THE ACCOUNTS OF THE STATE ARE WEIGHING
The state accounts are weighing down, but this is hardly a surprise. The state surplus of 52.5 billion euros in 2019 will plummet to -170.6 billion this year, thanks to the drastic increase in expenses to support the economy and the decline in tax revenues. The 2020 deficit will reach 86.9 billion, in 2021 it will be 68.4 billion.
Germany's much-criticized current account surplus (exports, imports, services, transfers) will also drop this year, from 244 billion to 215.4 billion, as exports are falling much faster than imports. However, the IFO estimates a recovery: in 2021 the surplus will rise again to 276.2 billion, in 2022 it will reach 290.1 billion.
STRATEGIES AGAINST THE SECOND WAVE
Health Minister Jeans Spahn played in advance on the pandemic front, who has already announced at a press conference the lines of the autumn plan to contain the second wave, in the hope of saving citizens and the economy a second total block. Spahn first reassured, stating that the country is better equipped than six months ago, when masks and disinfectants were missing and the entire primary care system found itself with few guidelines to deal with the impact of Covid. On the other hand, the hospital response worked excellently, so much so that intensive care never suffered and several clinics even welcomed patients from France and Italy. The receptive capacity of intensive care is always very high and the automatisms learned will allow an even more efficient reaction, assured the minister.
But the concern remains high, and increases with the growth of infections and with the tiredness of the population already in the face of the ordinary restrictive measures still in force. Especially among young people, the tension has dropped and adherence to the rules is more of an exception. The numbers of the last few weeks are a consequence of this. It is the big cities (Berlin, Munich, Cologne) that mark the highest curves of the contagion, where young people flock to bars and pubs that have reopened despite security measures not always respected. And in the parks, where coronaparties go crazy.
AUTUMN HOLIDAYS IN THE HOME
Soon there will be autumn holidays, a consolidated tradition in the German school, and Spahn wanted to warn students against traveling abroad: better to stay in Germany, holidays abroad have been a source of infections both last winter and summer. Meanwhile, the European regions considered at risk are increasing, in which it is not recommended to travel or for which there is an obligation to test or quarantine on return. In addition to large regions of France and Spain, capitals such as Prague and Vienna have been added in recent days. The growth of infections in neighboring countries, such as Austria, the Czech Republic, France and the Netherlands, increases fears. Central Europe, Poland, Hungary, Slovakia and the Czech Republic itself, which had managed to pass through the first phase of the pandemic with limited damage, also seem more vulnerable this time.
For Germany, Minister Spahn has announced the creation of "fever ambulances", mobile emergency centers to lighten the burden of fixed clinics, presumably clogged by the probable combination of Covid patients and those with normal seasonal flu. The appeal to all citizens (not only to the elderly, but also to schoolchildren) is to get the flu vaccine this year.
Meanwhile, the Länder and cities are starting to take new measures independently. In Munich, an outdoor mask will be mandatory in the squares and streets of the center where it is impossible to maintain a safety distance of one and a half meters and meetings with a maximum of 5 people or two families will be allowed. Berlin, a city that has seen the highest increase in cases in Germany in recent days, is considering restrictive measures in the nightlife districts (Kreuzberg-Friedrichshain). We will talk about it again at the summit with Merkel. The strategy to save the economy will be the one proposed by virologist Christian Drosten of the Charité of Berlin: no lockdown extended to the whole country but targeted blocks in areas or cities to limit the new spread of the virus.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/come-la-germania-cerca-di-evitare-una-picchiata-delleconomia/ on Tue, 22 Sep 2020 13:30:21 +0000.