In many societies, you are currently struggling with a balance of conscience. On the one hand, it is clear to everyone that the infection process must be slowed down. On the other hand, extending the closure would cause increasing problems for the whole industry. Because what it looks like at present, the Chancellor and the Prime Ministers of the federal states are likely to decide on Tuesday that restaurants, hotels and retailers will remain closed. With each closing date, financial assistance for affected companies is increasingly necessary. But this is a huge problem.
“The retail affected by the blockade is currently receiving little government support,” said Stefan Genth, CEO of the German Retail Association (HDE), Tagesspiegel. Bridging aid 3, which is intended to help finance fixed costs, is difficult for traders to reach and, in many cases, far from enough to avoid bankruptcy. In the current HDE survey, three quarters of retailers surveyed say the aid is too small to ensure economic survival. Two-thirds of retailers in the city center are currently in danger of being in existence.
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Genth supports these ratings by numbers. “The entire German retail sector received bridging aid of € 90 million in 2020,” he calculates. “However, the non-food trade lost 36 billion euros last year as a result of the pandemic and the related closure of sales.”
“If you consider that the second block is now affected by 200,000 companies, the amount of economic aid so far is negligible.” HDE estimates that blocking could cost the existence of 50,000 businesses, endangering 250,000 jobs.
Large companies in particular have problems
In gastronomy, the situation does not look much better. According to the German Hotel and Restaurant Association (Dehoga), the advances, initially a maximum of € 10,000 and later up to € 50,000, were at least the beginning for parts of the sector, especially smaller businesses. “So far, even this money has not reached all companies,” said CEO Ingrid Hartges. “So many companies have not received anything yet.”
He sees problems with larger companies in this crisis. “These amounts don’t help them at all,” says Hartges. “The big ones have high fixed costs and are also big employers, wages must be paid on time.” Reimbursement of the short-term contribution is not returned until a few weeks later. “So far there has been no help at all, that’s completely unacceptable,” Hartges complains. There is maximum frustration. “We expect politicians to pay out November and December aid to all companies as soon as possible, otherwise bankruptcies are inevitable.”
Up to five billion euros a week
These descriptions are confirmed at the Institute of German Economics in Cologne (IW). “Companies are increasingly living by nature and – to a lesser extent – by state aid,” Michael Hüther, its director, told Tagesspiegel. “However, bridging support is not very effective because the Federal Ministry of Finance has set up barriers to access so that there are almost no payments.”
Economist Michael Hüther demands a change in the Michael Kappeler / DPA locking rules
From his point of view, the decisive difference in the spring closure is that the industry has been heavily affected so far; the economic impacts are manageable in this case. “If borders remain open, value chains and the global economy can be stabilized halfway, which can succeed.” But without damaging the industry, Hüther estimates that the shutdown will cost around 3.5 to 5 billion euros a week of locking.
At the German Institute for Economic Research (DIW), an extension of the closure is still inevitable from an economic point of view. “Otherwise, the economic costs of a long-term second wave of infections would be significantly higher,” says DIW President Marcel Fratzscher. Due to the delay in the autumn, a consistent decision is now needed.
“No reason for undifferentiated locking decisions”
However, Hüther does not think that the lock must necessarily continue in its previous form. After all, in contrast to spring, more knowledge has been gained about the spread of the infection. For example, nursing homes have proven to be much larger hotspots than retailers. “There is no longer any evidence-based evidence for undifferentiated locking decisions,” he says, demanding that vaccination efforts be stepped up.
“Further extension of the closure after January should be avoided at all costs,” said Hüther. “It can succeed if all people in retirement homes and nursing homes are vaccinated and the age group over 70 is vaccinated faster – that is, day and night.”
School policy is economic policy
In order for the associations to survive another four weeks, they are demanding improvements in funding instruments. “KfW loans with a maturity of more than six years are valued at nominal value as aid, even though the loan is not in fact the same as direct financial assistance,” Hartges cites as an example. “There is an urgent need to correct EU state aid legislation.” HDE also expects better support from the German government. “It’s not enough to refer to a large amount that sounds impressive,” says Genth. “Theoretically available support does not save any company, the money must get to the company.”
And while the keywords childcare and school policy do not primarily sound like economic policy, they are currently of the greatest importance to societies. “If he can’t take care of the children, the staff is missing.” This can lead to sensitive and costly failures in industries where a home office is often not possible, ”said Hüther. “Childcare for younger children is therefore also a central element of economic policy.”