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Germany Looks to Boost Aid by EU20 Billion in Extended Shutdown

(Bloomberg) — Germany is discussing support of as much as 20 billion euros ($23.7 billion) for businesses affected by plans to extend a nationwide shutdown into December.

Because of normally brisk business during the Christmas season, financial aid is expected to exceed November payments, according to people familiar with the negotiations between Chancellor Angela Merkel and the leaders of Germany’s 16 states. The additional support could more than double total aid since early November to some 34 billion euros.

Officials imposed a partial shutdown this month that closed restaurants, gyms and cinemas, while keeping most of the rest of the economy running. With contagion rates still nearly triple a government target, the restrictions are set to be extended until at least Dec. 20.



chart: Rapid Spread


© Bloomberg
Rapid Spread

Authorities have said financial support would again be available if the restrictions are prolonged, which will likely happen on Wednesday when Merkel and state premiers finalize plans. For November, authorities have offered to reimburse businesses for about 75% of lost revenue, which is expected to total about 14 billion euros.

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There’s a broad consensus that aid is necessary to protect Europe’s biggest economy from the fallout of the pandemic. Finance Minister Olaf Scholz — a Social Democrat — said over the weekend that support will be needed beyond the end of this month, while a senior lawmaker in Merkel’s conservative bloc said Germany can afford further payments.

“If we extend this lockdown, if compensation payments continue, especially in the restaurant business, that’s a serious burden for the federal budget,” Ralph Brinkhaus, head of the parliamentary caucus of Merkel’s CDU-led bloc, told reporters on Tuesday.

While the federal budget can handle the support for now, states will need to contribute if payments continue into 2021, according to Brinkhaus. “It cannot be that all of this is carried by the federal budget,” he said.

The government — traditionally committed to balanced budgets — plans to finance pandemic-related spending by raising more than 160 billion euros in new debt next year, compared with the current target of 96.2 billion euros.

Deteriorating Sentiment

Despite efforts to ease the burden on affected businesses, the latest restrictions have hurt sentiment, a monthly survey by the Ifo institute suggested Tuesday.

An expectations gauge fell to 91.5 in November from 94.7 the previous month, a steeper drop than economists forecast. More than 70% of companies in the hospitality sector are worried about failing, with almost 20% wondering if they’ll even get through this month, Ifo said, adding that a sub-index for hotels and hospitality “absolutely nosedived.”

Ifo President Clemens Fuest said that the government’s strategy appears tailored only for the coming weeks and entrepreneurs would prefer a longer-term plan.

“Businesses are more or less resigned to the fact that this uncertainty — these measures coming in and being lifted again — is going to stay for some time,” Fuest said in a Bloomberg TV interview



chart, line chart: German business confidence slides amid virus restrictions


© Bloomberg
German business confidence slides amid virus restrictions

The number of cases in Germany has tripled since the start of October to more than 900,000, and the amount of people with the disease in intensive care is at record levels.

Read more: Europe Is Trying to Crack the Door Open for Christmas

The heads of Germany’s states agreed on Monday to extend the latest lockdown restrictions, while tightening rules limiting social contact. The measures would be rolled over for periods of two weeks if contagion rates remain above the government’s target level.

The goal remains to allow Germans to celebrate Christmas with their families. According to the latest proposals, contact restrictions would be loosened for the Dec. 23 to Jan.1 period, with gatherings of up to 10 people from different households allowed and children up to the age of 14 exempted.

(Recasts with aid figure)

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