The primary measure extended was the short-time work subsidy from March 2021 to the end of next year. The subsidy seeks to save jobs by allowing employers to reduce the hours of their employees but keep them in employment.
The ruling CDU and SPD also agreed to extend measures to prevent bankruptcies by allowing financially troubled firms to file for insolvency until the end of 2020.
The latest developments adds to Berlin’s €130 billion stimulus package announced in June 2020, which overturned the characteristic fiscal restraint and orthodoxy of Merkel led administrations to boost demand through slashes in VAT, provide tax incentives for businesses and herald a revolution in Germany’s green energy industry.
Following the conclusion of talks, the leader of the Christian Democratic Union Annegret Kramp-Karrenbauer expressed her belief that ‘corona remains a reality and a challenge’. Finance Minister and member of the Social Democrats, Olaf Sholz added that the ‘goal now is to stabilise the economy. The fact we acted fast and big has resulted in Germany weathering the crisis much better than other countries’.
While Germany saw its record quarterly GDP contraction of 10.1% in the three months to July, this was much below the Eurozone and EU average. The IMF forecasts Germany to see a fall in output by 7% this year, before growth of 5.2% in 2021.