After nearly a decade of fiscal restraint, German MPs voted on Wednesday to suspend the country’s so-called “debt brake” and back a historic €156 billion emergency budget to fight the growing coronavirus crisis.
In a slimmed-down Bundestag session, MPs sitting two seats apart for health reasons gave their backing for emergency legislation to boost healthcare spending, support those struggling and avoid a total economic crash.
“There is no blueprint for countering such a crisis,” said Olaf Scholz, federal finance minister and deputy chancellor. “It is important that help reaches where it is needed, that is our contribution.”
As Germany registered nearly 32,000 cases on Wednesday, up 4,000 in a day with 149 fatalities, Mr Scholz was deputising for chancellor Angela Merkel. She is isolating herself at home after contact last Friday with a doctor who later tested positive for coronavirus. On Wednesday, a government spokesman reported a second negative test for the German leader.
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The emergency budget – almost half the volume of a regular budget, and entirely debt-financed – has three main components.
56,000 ICU beds
First, it provides extra spending for medical care: an extra €3 billion for German hospitals, in particular for 56,000 more intensive care beds, and an additional €3.5 billion for protective equipment.
A second pillar is targeted at citizens and provides €7 billion for a surge in welfare and dole payment, and salary replacement payments for parents caring for children at home.
A new provision will allow arrears without penalty of up to three months on most household bills as well as rent and mortgage payments. A further €55 billion has been set aside for unforeseen emergencies.
A third pillar to stabilise the economy provides one-off liquidity payments of up to €15,000 for small firms, subsidies for firms to retain staff by cutting non-wage costs, effectively unlimited loans through a state-owned bank, and a €600 billion public rescue fund for larger, strategic firms.
Post-war record
The package, worth about 10 per cent of Germany’s gross domestic product, is unprecedented in post-war history. Passed with almost unanimous backing of all parties, the measures have to pass the upper house, the Bundesrat, on Friday in a vote seen as a formality.
Mr Scholz said that, once the immediate crisis has past, Germany is likely to present a “timely, targeted and temporary” stimulus plan to revive Europe’s largest economy.
With an eye on the immediate future, the Bundestag voted to allow MPs pass legislation in future if only a quarter of the total number are present, down from one half until now.
Green Party co-floor leader Katrin Göring-Eckardt praised German citizens for heeding government decrees to stay at home, saying: “By keeping our distance we are holding together.”
