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Switzerland currently has significantly higher infection and mortality rates. By contrast, Germany and Austria have stricter restrictions. “What this could mean economically for the winter.
The restaurants on the Gendarmenmarkt in Berlin close again for a month.
The new restrictions came around the same time: the governments of Berne, Berlin and Vienna announced another partial shutdown last week. But although Switzerland has been the hardest hit by the second crown wave so far, it is initially less restrictive of economic and public life than Germany and Austria.
In Germany and Austria, for example, restaurants will be closed until the end of November. In Switzerland, on the other hand, only a few cantons in western Switzerland have so far closed their restaurants. But there is also something in common between the countries: shops and schools remain open everywhere. Can you now estimate which procedure is most economically promising?
Lightly through the first wave
First of all, it should be noted that all three countries weathered the first wave of the corona pandemic relatively lightly in a European comparison. According to Eurostat, Germany’s real gross domestic product (GDP) in the second quarter “only” contracted by 9.8% compared to the previous quarter. That was less than in Austria (-12.1%), but above all less than for some particularly affected heavyweights such as France (-13.7%), Italy (-13%) and Spain (-17.8 %). . With a decrease of 8.2%, Switzerland performed slightly better than Germany and Austria.
The different course of the pandemic, but also the different reactions to it, may have contributed to these differences. In a European comparison, Germany had slightly fewer infections and the lockdown was less extensive than in France, for example. At the same time, Germany launched in March a package of aid for the economy, which in terms of GDP was among the largest in the world.
In a European comparison, the first locks in Germany, Austria, and Switzerland were very similar in terms of time and content. The biggest difference was that there were never any formal exit restrictions in Switzerland. There were also differences in reactions. In Austria, aid took longer than in neighboring countries to reach the economy. Ultimately, some differences in economic structures probably played a role. In Switzerland, for example, the tourism industry is less important than in Austria; on the contrary, the pharmaceutical industry, which has tended to benefit from the crisis, contributes more to economic output.
These reasons may have contributed to the fact that Switzerland weathered the crisis economically in spring a little better than Germany and Austria. However, Switzerland fared worse in other respects. There were more deaths per crown per capita.
In the summer months, the picture was reversed to some extent: the economic performance of countries with a deeper recession in the second quarter also tended to recover significantly more strongly in the third quarter. For example, GDP in Austria increased by 11.1% in the period from July to September, while in Germany it “only” increased by 8.2%. No official estimates for Switzerland are yet available. But economists at Credit Suisse, for example, expect a 6% increase. In all these countries, the pre-crisis level is far from being reached again.
The deeper you push the ball into the water. . . “
These correlations are derived from the fact that the rebound in the third quarter was mainly due to the restart of previously closed or severely restricted economic activities. “The deeper you push a ball underwater, the higher it jumps out of it,” said Andreas Scheuerle (Deka Bank), describing this effect. The same goes for the economy. Even before the latest new restrictions, the rally lost momentum.
In autumn, the number of infections rose again sharply in all three countries. However, Switzerland stands out in a European comparison. It currently has about twice as many new daily infections per capita as Austria and four times as many as Germany. With an exponential course of the infection curves, this only reflects a “waiting time” of one to two weeks. To this extent, the Swiss government reacted later than those responsible in Berlin and Vienna.
Different harsh restrictions
In Germany, Chancellor Angela Merkel and the prime ministers of the federal states, after initial restrictions, decided on a partial shutdown from mid-October on October 28, which began on November 2 and will initially last until the end of November. During this time, restaurants, bars, nightclubs and leisure facilities such as theaters and gyms will be closed. Only delivery and take-out services are allowed. Overnight stays in hotels are only allowed for necessary and expressly non-tourist purposes. Unlike spring, schools and daycare centers will remain open, as will retail.
Austria responded almost identically to the recent increase in the number of reported infections. Restaurants, bars, cinemas and theaters are closed from November 3. Hotels cannot accommodate tourists, there is an exception for business trips. Otherwise, businesses can continue to operate.
On the contrary, the approach in Switzerland is more cautious. Discos and dance halls have been closed across the country. But restaurants and bars can still serve 4 people per table. Sporting and cultural events can be held by up to 15 people. So far, only a few cantons in western Switzerland have imposed stricter restrictions, such as closing restaurants, bars, cinemas and museums.
Extensive state aid
In all countries, those affected by the new measures receive financial support from the State. In Germany, companies, freelancers, associations and institutions affected by the temporary closure in November will receive exceptional financial assistance from the federal government. For companies with up to 50 employees, this should represent 75% of the sales of the same month of the previous year (November 2019, in special cases another calculation basis is also possible), for larger companies the percentage will be slightly lower. If a company already receives aid from existing aid programs (short-term work allowance, bridge aid), it will be deducted; aid does not accumulate. In principle, Austria proceeds in the same way as Germany. Companies only have to be reimbursed 80% of their turnover and not “only” 75% as in the neighboring country.
Since companies have hardly any variable costs during closing – a closed restaurant does not have to buy drinks or groceries – the measures taken by the two countries are considered quite generous. However, these are companies that have barely recovered from the first wave of the pandemic. German Finance Minister Olaf Scholz expects costs of up to € 10 billion. In Austria, the latest aid measure will burden the national budget with a billion euros, estimates Finance Minister Gernot Blümel.
On the contrary, the Swiss government sticks to existing instruments. This week, for example, it extended the income compensation for affected freelancers until mid-2021. In addition, the aid planned for difficult cases, especially for companies in the tourism, gastronomy and events sector, will be brought forward to December 1. In all countries there are still generous regulations on short-time work to maintain jobs.
However severe the restrictions may be in part, they only affect a comparatively small part of the economy. According to an estimate by Deutsche Bank Research, around 2% of gross value added is involved in Germany. In addition, the companies and employees affected have the support of the state. Therefore, many economists agree that the current partial lockdown will result in less severe losses than the first spring closings.
A winter with many uncertainties
While the German government assumes a low GDP growth of 0.4% in the fourth quarter according to its autumn forecast published on October 30, including the partial lockdown, the German Institute for Economic Research (DIW) expects according to a publication of the November 2nd. a decrease of 1%. Other economists spoke of stagnation or slight drop in GDP. A significant weakening is also expected in Austria. Switzerland could, also due to the more moderate restrictions, be affected a little less severely for the time being. Analysts at Credit Suisse expect GDP to decline 0.5% in the fourth quarter.
However, development is fraught with great uncertainty. It remains to be seen whether Germany and Austria will actually lift the partial lockdown at the end of November or whether it will be extended, strengthened or reimposed after a hiatus, with reference to the still too high number of new infections. In Switzerland there could be a nationwide tightening, such as restaurant closures, which some cantons have already started. With expanded and more drastic crown measures, the economies of all three countries would likely be hit hard again.
In Austria, nerves are tense, especially due to the upcoming winter season. Currently no one has the slightest idea if and to what extent the ski season will unfold. If it failed, many hoteliers and elevator operators would be hit hard, especially in the west of the country. In recent years they have invested a lot of money in their systems and therefore depend on a large number of visitors to pay off the investment.
In Austria, tourism is about twice as important in macroeconomic terms as in Germany and Switzerland. A winter without skiing would reduce the country’s GDP by around 1.5 percentage points, estimates the economic research institute (Wifo). In the capital Vienna, the extensive tourism and leisure sector is already in great difficulty. Austria would run into serious trouble if something similar were to happen in the Alps.
