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Anyone who has to shut down in the next month should be generously compensated, the government has promised. But many important details of the new emergency aid are still unclear.
In the spring it was the “Bazooka” that Finance Minister Olaf Scholz withdrew to limit the crown damage to the economy. And this time, too, the SPD politician tries the superlative. Scholz speaks of “massive support lines of this magnitude previously unknown.” Those who are particularly affected by the new restrictions in the fight against the pandemic should be generously compensated, as he and Economy Minister Peter Altmaier promised. Answers to the most important questions.
Who will receive compensation?
All those who are prohibited from doing business as of November. Companies, businesses, associations and institutions that have to close or have already closed should benefit. Freelancers should also get help. Therefore, it is mainly about restaurants, cafes, bars, pubs or clubs, but also swimming pools, gyms, theaters, cinemas, concert halls, amusement parks and game rooms. Cosmetic studios, massage practices, or tattoo shops.
But also those who are affected “indirectly but in a comparable way” should be compensated according to the Ministry of Finance and Economy. This could apply to hotels or guesthouses, for example. You don’t have to close. However, since they are no longer allowed to host tourists, it will no longer be worthwhile for a large number of companies to host guests.
How much is paid
75 percent of sales will be refunded starting in November 2019, for companies with up to 50 employees. Larger companies should receive less. Other state benefits, such as short-term job benefits or transition allowances, are offset. If a business did not exist in November 2019, the October 2020 sales are used as a benchmark. Freelancers can also use average sales from the previous year. The aid is intended to be paid as a lump sum.
How much money is it?
The government wants to distribute up to ten billion euros for November aid. The money should come from the pot for previous Corona aid programs. “We already have enough,” says Finance Minister Scholz. The government had provided a total of 25,000 million euros for bridging aid, in which the companies most affected by the pandemic were reimbursed a large part of their fixed costs. Of this, however, only around € 1.2 billion have been approved so far. Many companies have criticized the regulation for being too bureaucratic.
What has not been clarified yet?
A lot. So far it is not known which companies or facilities will be compensated that do not have to close due to government regulations, but de facto they lose almost all their business: for example, a laundry that works for hotels or a supplier for the catering trade. It’s also unclear how the low sales that restaurants still generate in November are measured by sales away from home. Another unanswered question is when companies can submit applications and how quickly the money will be paid. The finance and economy ministries are working on the details. They promised quick help without bureaucracy.
Is the help enough?
The aid for restaurants, pubs or leisure facilities that have to close in November is quite generous. Three-quarters of sales in November 2019 will in many cases exceed the revenue they would otherwise have had this month in light of the second corona wave. However, the situation for many companies could become critical again after November, if allowed to reopen, but the pandemic is far from over. Some retailers might also run into trouble when their already poor business with new editions collapses further. In any case, economists expect a wave of bankruptcies by the end of the year. The force with which the economy hits depends mainly on the further development of the number of infections.
How much help has already been given to the economy?
According to the Ministry of Economy, the German state has approved a total of 70.7 billion euros in crown aid at the end of October. However, the most important element here is the KfW development bank loans. They represent more than 45,000 million euros.
So far almost 14,000 million euros have been allocated to emergency aid for small businesses, the self-employed and the self-employed. In addition, there are another 6.6 billion euros from the so-called economic stabilization fund, with which federal loan guarantees are financed, and aid to companies with economic needs. The federal government has provided guarantees worth several billion euros.
Plus there’s the bailout package for Lufthansa – this only includes around nine billion euros, for the 20 percent stake in the troubled airline, silent stakes and loans. Another great element is the reduced-time work allowance, which relieves the company. It will rip the Federal Employment Agency’s budget deep into the red this year – a deficit in the double-digit billion range is expected. In the first half of the year it was already 10.3 billion euros.
Is there more planned?
The government is not targeting large additional aid packages. The ministries of economy and finance want to review the bridge aid for small and medium-sized enterprises and extend it until 2021. The details are not clear here either. It is a “concept adapted to special industries,” said Finance Minister Scholz. It should help, among other things, the culture and events industry that has been hit hard.
How does the state finance all this?
Due to debt. Finance Minister Scholz is planning 96.2 billion new debt so far for next year. For this year, 217,000 million euros in debts were added. However, Germany still has the lowest debt ratio among the major industrialized countries (G7).
