Economy: Germany is the winner of the crisis, but the figures are explosive.

SThe numbers were more difficult to interpret than they currently are. On the one hand, what the Federal Statistical Office calculated for the first quarter is clear: Germany’s economy plunged 2.2 percent at the beginning of the year when the pandemic started from China. It is the worst depression since the financial crisis and the second strongest since reunification. And since the Federal Statistical Office also calculated a negative sign for the fourth quarter of 2019, Germany is in the first recession since the beginning of 2012/2013.

On the other hand, despite the depression, Germany is still relatively well positioned compared to its European neighbors. In Spain, GDP fell 5.2 percent and in Italy 4.7 percent. And economic output in France, which was particularly hit, even fell 5.8 percent.

Of all places, Germany, the exporting nation, has obviously overcome the world crisis much better than other nations. This despite the fact that global supply chains have been disrupted and global trade as a whole has stagnated. The main reason for this is that, thanks to its well-equipped healthcare system, Germany has overcome the pandemic much better than other neighbors of the euro and, therefore, has not had to go through an economic blockade as hard as it did in Italy, France or Spain was the case.

Germany is a relative winner

However, the full impact of the pandemic is not yet reflected in the figures for the first quarter. It was only in March and, therefore, at the end of the quarter, the economy was left in an artificial coma due to the closure. Therefore, experts expect the economy to shrink significantly more significantly between April and June, that is, about 14 percent. But here, too, the euro zone’s largest economy is likely to develop more easily than other countries. A 16 percent drop is forecast for Italy, France or Spain in the second quarter.

Germany may be the relative winner in the Corona crisis: on average, GDP in the euro area decreased by 3.8 percent, and therefore significantly more. But the best numbers also have a certain explosive force, because they cover the growth problem that the country has been in for years. Germany experienced the slowest expansion in six years in 2019.

The export model took a heavy hit in the trade dispute between the United States and China, while the automotive sector, the largest German export sector, had to contend with the next big challenge after the exhaust gas scandal, change global to electric motors. In light of the relatively dizzy numbers, politicians may be tempted to pat their shoulders prematurely and once again postpone urgently needed structural decisions.

The relatively slight collapse compared to other euro countries already has its price. Berlin has launched one of the most expensive government rescue programs. In addition to a supplementary budget of € 156 billion, which corresponds to around 4.5% of GDP, a rescue fund of € 600 billion was created. In addition, the federal government has awarded € 400 billion in state guarantees: the federal government guarantees around 100 percent of the loans that small businesses have had to borrow due to the crisis.

The numbers are politically explosive. In France, Italy or Spain, for example, there is a growing desire for Germany to contribute more to post-pandemic reconstruction. Paris recently demanded that the planned reconstruction fund be increased to two trillion euros and that the funds go mainly to the south.

There were also clear traces in the labor market

In Germany, private consumption in particular took the wheel in the first quarter. Even before the official shutdown, many people stayed away from stores or cut their expenses out of concern in the future. In March, with the start of the official closure, the situation worsened. Although stationary retail was able to post growth in consumer goods sales due to hamster purchases, there was also growth in online retail.

However, this was partially offset by a very significant drop in sales in those areas where companies sometimes had to close entirely due to the pandemic. For example, sales of textiles and shoes fell by more than 50 percent in March. Books and furniture registered a drop of about 20 percent. In contrast, pharmacies and retailers in the food and beverage sector benefited, each registering an increase in sales of more than seven percent.

Companies acted with the same caution as private consumers in the first quarter, so investments in equipment, particularly machinery, equipment, and vehicles, decreased significantly. Public spending and construction investments, on the other hand, had a stabilizing effect and prevented a further decline in GDP. In terms of foreign trade, both exports and imports fell sharply compared to the last quarter of 2019.

There were also clear traces in the labor market. According to the latest figures from the Federal Employment Agency, at the end of April there were 751,000 short-term job announcements for a total of up to 10.1 million employees. “The increase in short-term work will have a strong impact on both earnings growth and hours worked in Germany, although short-term assignments buffer most of the loss of earnings for employees,” is the evaluation of the Federal Statistical Office.

In the first quarter, the macroeconomic consequences of short-term work were still quite weak: with the increase in short-term work in the second half of March, gross monthly earnings in all industries fell 0.3 percent and weekly working hours by 1.0 percent. “If the entire second quarter of 2020 is now affected by a high level of short-term work, the macroeconomic consequences will also be much more pronounced,” statisticians warn. In other words, the full cost of the crisis should not be apparent until the second quarter. And then the numbers are easier to interpret.