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Pandemic drives Germany to highest deficit in 30 years

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

The statement was released on Wednesday by the Bureau of Statistics.

The pandemic, which has so far claimed more than 77,000 lives in Germany, has devastated Europe’s largest economy, although it has proved more resilient than many thought, in part because of the strong continued demand for exports from China.

Public spending rose 12.1% to € 1.7 trillion in 2020, as the government did everything to offset the impact of months of lockdown, while tax levies fell by 3, 5% to 1.5 trillion euros.

The spending frenzy was expected to continue, when German Finance Minister Olaf Scholz vowed last month to do whatever is necessary to enable Germany to emerge from the economic crisis induced by the coronavirus.

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 with shortened working hours declined last month, driven by the industrial sector, which benefited from robust exports, said the Ifo Institute of the Leibniz Institute for Economic Research of the ‘University of Munich.

Companies can shorten workers’ hours as part of a government program designed to avoid mass layoffs during the recession by offering companies subsidies to keep workers on the payroll.

In March, 2.7 million employees had reduced hours, compared to 2.9 million, Ifo estimated.

The number of people participating in this program peaked at around 6 million a year ago, but has increased steadily since Germany entered its second lockdown late last year. (Reuters / NAN)

(NAN)

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