Germany signed off on taking on billions in new debt as part of an unprecedented package totaling more than 750 billion euros ($800 billion) to cushion the fallout from the coronavirus pandemic.
Under a supplementary budget, the government will borrow 156 billion euros to fund additional social spending and company aid in a coordinated effort to prevent deeper economic disruption.
Germany has also agreed to set up a 600 billion-euro rescue fund to provide virus-hit companies with loans and guarantees as well as buy stakes in stricken businesses. The fund consists of 400 billion euros in guarantees, 100 billion euros to bail out companies and 100 billion euros for state-backed loans.
The government did the right thing to “deploy the bazooka,” Economy Minister Peter Altmaier said at a press conference in Berlin, warning off investors from taking advantage of the crisis to snap up German companies on the cheap.
“To everyone in hedge funds or elsewhere who is already looking forward to buying one or the other cheaply, make no mistake about it: We are determined to assist our companies in this situation,” he said.
As the devastating implications of the disease become clear, Merkel’s ruling coalition is abandoning a long-standing commitment to balanced budgets and using emergency powers to suspend rules restricting borrowing that are enshrined in the constitution. As cases rise to nearly 25,000 and nearly 100 deaths, Germany banned gatherings of more than two people as part of tougher lockdown rules intended to slow the pace of the spread.
With modern life severely disrupted, the economy could shrink by about 5% this year, according to Finance Minister Olaf Scholz, who held aloft a large stack of legislation to illustrate the government’s efforts to limit the damage.
Germany’s Virus Package
156 billion euros in debt to finance higher social spending and a 50 billion-euro liquidity fund for self-employed people
600 billion-euro rescue fund
400 billion euros in guarantees
100 billion euros in loans through state-run development bank KfW
100 billion euros earmarked for equity stakes in companies
