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The German economy issued an urgent warning about the consequences of a second closure of the crown. It didn’t help: the federal and state governments reissued mass shutdowns and contact bans since Monday.
According to calculations by economists, this month-long shutdown in some sectors of the economy is likely to cause great damage. The closure will cost around 19.3 billion euros, determined the German Institute for Economic Research (DIW) for “Welt am Sonntag.” With losses of 5.8 billion euros, restaurants and hotels are the most affected.
That would be a 55 percent loss of typical economic output in one quarter. However, many of the affected entrepreneurs will not have to cope with the sales decline alone. Politicians are planning, perhaps also to avoid lawsuits, generous compensation. Up to 75 percent of the prior year’s sales should be offset; this has likely only been achieved by a few owners or hoteliers in recent months.
More work expected in the short term again
According to DIW, the sports, culture and entertainment areas have to face a loss of 2.1 billion euros and retail sales of 1.3 billion euros. According to DIW, the German industry must have less than 5.2 billion euros. A large part of the remaining amount goes to corporate service providers, logistics companies and also theater operators.
The lockdown should also have an impact on the labor market. According to DIW’s forecast, the number of employees will decrease by almost 100,000 in the current fourth quarter. The number of short-time workers will increase by 400,000 to 3.2 million by the end of the year. In 2021 the number of bankruptcies and the number of unemployed will increase. The latter is currently being mitigated with the reduced working hours.
The German Business Institute (IW) in Cologne, which is close to the employer, also anticipates dramatic consequences for the economy and employment. 591,000 people would lose their jobs this year and another 15,000 next, “provided the shutdown ends as announced,” said IW director Michael Hüther of “Bild am Sonntag.”
Damages for turning the economy on and off
“The lockdown light until the end of November, which we now have, is expected to reduce GDP by one percentage point,” Hüther said accordingly. If the lockdown lasts longer, GDP could fall by two percentage points, Hüther added. “So we can expect an additional 180,000 unemployed by next year.” Additionally, repeated switching on and off causes structural damage to much of the economy. “The resulting losses would have to add up.”
At the beginning of the week, the general gastronomy, as well as the leisure, cultural and sports facilities have to close again. Commerce, as well as schools and nurseries must remain open. Here you can read which rules apply from Monday.
DIW researchers around Marcel Fratzscher expect a significant recovery next year. “We assume that the gross domestic product will be able to increase again significantly in 2021, but only if the second wave of infections can be stopped soon,” said the president of the DIW.
The blockade met with popular approval in November. According to a poll conducted by the Kantar opinion research institute for “Bild am Sonntag”, 59 percent consider that the measures taken by the government are the correct ones. 28 percent think they are excessive, 12 percent would like even stricter rules and one percent answered “I don’t know.”
