German coalition agrees €10 billion extension of #Coronavirus relief

German coalition parties agreed on Tuesday (25 August) to extend measures to cushion the effects of the coronavirus crisis on Europe’s biggest economy at a cost of up to €10 billion, including prolonging a short-time work scheme and freezing insolvency rules, write Andreas Rinke, Holger Hansen and Madeline Chambers and Joseph Nasr in Berlin. 

The German economy contracted at its steepest rate on record in the second quarter and the government is desperate to mitigate the effects of the pandemic as much as possible, especially in the run-up to elections in the autumn of 2021. “Corona remains a reality and a challenge,” said Annegret Kramp-Karrenbauer, leader of the conservative Christian Democrats (CDU) after around seven hours of talks with their centre-left Social Democrat (SPD) coalition partners. “Today we have agreed that we will extend important and effective measures to how we deal with the coronavirus,” she added.

Among the main decisions were an extension of short-time work subsidies, which had been due to expire in March 2021, until the end of next year and prolonging bridging aid for small and mid-sized companies until the end of this year. Short-time work saves jobs by allowing employers to reduce the employees’ hours but keeps them in work. Finance Minister Olaf Scholz, a Social Democrat, told public broadcaster ZDF the measures could cost up to €10bn next year. “The goal now is to stabilize the economy,” said Scholz. “The fact that we acted fast and big has resulted in Germany weathering the crisis much better than other countries.”

The parties also agreed to prolong measures aimed at staving off bankruptcies by allowing firms in financial trouble due to the pandemic to delay filing for insolvency until the end of the year. German Chancellor Angela Merkel’s government has also brought in a massive stimulus package, worth more than €130bn, that it hopes will help the economy return to growth. The coalition parties also agreed on an electoral reform aimed at reducing the number of lawmakers in the Bundestag lower house of parliament.

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