Pandemic drives Germany to highest deficit in 30 years

Pandemic drives Germany to highest deficit in 30 years

Germany’s public sector deficit reached 189.2 billion euros (225 billion dollars) in 2020, thanks to the coronavirus pandemic, the first deficit since 2013 and the highest budget shortfall since German reunification three decades ago.

The statement was issued by the Statistics Office on Wednesday.

The pandemic, which has so far claimed more than 77,000 lives in Germany, has devastated Europe’s largest economy, even though it has proven more resilient than many expected, partly because of continuing strong export demand from China.

Public spending rose 12.1 per cent to 1.7 trillion euros in 2020 as the government pulled out all the stops to offset the impact of months of lockdown, while tax take fell 3.5 per cent to 1.5 trillion euros.

The spending spree was set to continue, when German Finance Minister, Olaf Scholz, last month promised to do whatever was needed to enable Germany to spend its way out of a coronavirus-induced economic slump.

Germany was struggling to control a third wave of the pandemic and was set to keep many businesses, like bars and cinemas, closed until at least later this month.

However, the number of people on shortened working hours declined last month, driven by the industrial sector, which was benefiting from robust exports, the Ifo Institute, Leibniz institute for Economic Research, University of Munich, said.

Companies can shorten workers’ hours under a government scheme designed to avoid mass layoffs during the downturn by offering companies subsidies to keep workers on the payroll.

In March, 2.7 million employees were on shortened hours, down from 2.9 million, Ifo estimated.

The number of people on the scheme peaked at about 6 million a year ago but had been rising steadily since Germany entered its second lockdown late last year. (Reuters/NAN)

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