Russian Germany (Germany): the future through the prism of the crisis

“The crisis of the century” in the coming months, predicted the world managing Director of the IMF Kristalina Georgieva, announcing frightening downturn in the world economy, outstripping even the wildest pessimistic forecasts of financiers. So if correct these estimates and whether Germany is ready to survive the coming “storm”?

The German economy is the most viable among all the countries of Europe, recently said the Tagesspiegel newspaper. Despite the fact that in the first quarter of 2020 gross domestic product (GDP) in Germany fell as much as 2.2% in comparison with last year is the best result among European countries. The coming crisis, Germany came up with good financial indicators: the level of German public debt in relation to GDP was only 62%, and a comprehensive package of social assistance comprised 30% of the total GDP.

These numbers overshadow the results of a poll conducted by the Institute for economic research Munich (ifo), in which more than 58% of restaurant owners, 50% owners of the hotel business and almost 43% of owners of travel agencies have been forced to reduce its staff in April. “The crisis has already caused significant damage and continues to beat on the German labor market”, — concluded the head of the Department of University studies Wohlrabe Klaus (Klaus Wohlrabe).

Extremely alarmed at the Federal Ministry of economy and energy of Germany (BMWi). “Generally, there is a very strong influence on the business sector. Particularly affected, of course, those firms whose business has had to partially or completely suspend due to restrictions,” — commented the representative office. “This situation creates a chain reaction effect, because after the affected businesses suffer loss and partner companies, faced with lower demand or problems with supplies”, — said in the Ministry. On the other hand, in BMWi expect a positive impact from the recent weakening of quarantine measures in Germany and hope that the gradual easing will enable the business to win back some losses and to strengthen their positions in a weakening market. However, accurate predictions, no one yet can not give. It is also unknown whether further opening of individual stores and commercial premises to increase sales in the retail, services and entertainment, because according to the Ministry, the ratio of visits to shopping centres and recreational areas in Germany in the period of the pandemic had declined by 33%.

The Achilles heel of the German business is considered the sphere of public catering. This thesis confirms the survey conducted by the Federal Association of chambers of Commerce of Germany (DIHK), which implies that a third of German gastronomy companies are on the verge of financial collapse and the onset of the upcoming wave of the crisis simply will not survive. Catering for many years known for its high level of bankruptcies, leaving far behind other areas of economic activities, and this trend was strengthened long before COVID-19. According to the Federal statistical office (Statistisches Bundesamt), in 2019 10,000 owners of cafes and restaurants 97 were insolvent. That is a lot, considering that most bankrupt only owners of companies in the fields of transport or storage. A decline of 30% occurred even in stable industries such as the chemical industry, which led to substantial losses in the automotive industry — 94% of all manufacturers are faced with financial difficulties. “This transcends all the indicators of the 2009 crisis,” says Klaus Wohlrabe. According to the ifo, 39% of automotive industry companies are planning layoffs in the next months.

The automotive industry is of strategic importance for the German economy and is one of the main articles of the German budget. According to the President of the Association of small and medium business in Germany (BVMW) Mario Ohoven (Mario Ohoven), the car industry provides over 800,000 jobs and is one of the most important areas of German exports. “That is why the government needs first and foremost to ensure the survival of this industry in times of epidemic” — says the Ohoven. Rescue the automobile industry, many experts see the financing of infrastructure for electric vehicles. It is believed that this is a promising direction able to give momentum to the whole sector of the German economy.

The President of the BVMW is confident that the coming financial collapse, Germany will be able to overcome, through a series of successful structural transformation. “First of all it is necessary to restore the confidence of small and medium business market, and hence to long-term investment returns. To this end, the German government needed a vast programme of economic reforms, where the focus will be on reducing taxes and duties and exclusive of flexibility in relation to different types of financial activity”, — shares his vision of Ohoven. In addition, the expert insists on the necessity of the abolition of the “solidarity tax” retroactively from January 1, 2020, which will greatly reduce the financial burden on businesses and give entrepreneurs a much-needed fresh lean liquidity.

To meet the coming crisis and the government of Germany. The other day on a four-step plan of salvation of the national economy mentioned, the Federal Minister of economy and energy Peter Altmaier (Peter Altmaier). In addition to the already adopted financial aid package, the new project will include a program to stimulate business, as well as “fitness scenario”, whose goal will be the system support the economy, attract investment and innovation to accelerate the bureaucratic procedures in relation to the entrepreneurs. The plan of salvation proposed by the Minister Altmaier, it seems especially timely against the background of the forecast of the European Commission, predicted the downturn in the economy of Germany 6.5% of GDP by the end of this year.

Contrary to the General economic downturn and the pessimistic scenarios of the coming financial collapse, have coronaries the positive side, the acceleration of the digitalization of society and government institutions. Fortunately, in this direction, Germany has already achieved great success, moving on “udalenka” a number of public services and institutions, partly to speed is known for its slowness of German bureaucracy. Perhaps that is why the European Commission has predicted that the unemployment rate in Germany this year will fall only to 4%, this is only slightly worse than pre-crisis numbers.