Germany needs $162bn stimulus, Merkel ally says

Bloomberg

German Chancellor Angela Merkel’s government should finance a stimulus plan worth as much as 150 billion euros ($162 billion) to help offset the economic fallout from the coronavirus crisis, Bavarian state leader Markus Soeder said.
Measures taken by Merkel administration, including an existing $610 billion liquidity program for companies, are insufficient, Soeder said. His comments come as the government is considering additional aid for small companies and self-employed people, local media reported.
“I honestly say, there must be more. I believe that we will need a big finance and growth package on the national level of at least 100 billion euros, in the end probably 150 billion euros”, Soeder said in the Bavarian state parliament in Munich.
The liquidity program which Merkel’s government lined up might be useless because many banks would no longer be able to provide the necessary loans, said Soeder, who at one point was considered a potential candidate to succeed Merkel.
According to Spiegel news magazine, the government is planning to earmark 40 billion euros in additional aid for self-employed people as well as small companies. Thereof, 30 billion euros would be loans to troubled companies.
The ifo Institute forecast that Europe’s largest economy could shrink by between 1.5% and 6% this year.

German business
Confidence Plunges
German business confidence plunged the most in almost three decades, offering chilling evidence that Europe’s largest economy may be headed for its worst recession since the global financial crisis.
The drop means sentiment among Germany executives is now the weakest since 2009. That mood is probably reflected across Europe after governments shut down large parts of public life and factories temporarily suspended production to prevent the spread of the deadly coronavirus.
Forecasts are struggling to capture extent of disruption, which swept across continent in a matter of weeks. The European Central Bank stepped in with emergency stimulus to aid region’s ailing companies, after numerous governments pledged to do their utmost to protect workers.
Germany’s leading research institutes issued updated economic projections, along with words of caution stressing it’s almost impossible to gauge to full impact of the crisis.

Accordingly, forecasts for 2020 diverge widely, with DIW offering the least pessimistic outlook and IfW, the Institute for the World Economy, the most gloomy one.
The euro continued its decline on Thursday. The single currency traded at $1.0808 at 11:19 a.m. Frankfurt time, down 1%.
Heavyweight corporations including Volkswagen AG and Daimler AG have idled their European plants as the rapidly spreading virus wreaks havoc on global supply chains and sucks the air out of consumer demand. Companies including Deutsche Lufthansa AG have signaled they’re planning to seek public aid.
Yet it’s services providers, which helped Germany grow last year despite its deep manufacturing slump, who are particularly vulnerable right now. Often smaller businesses without bigger reserves that would tide them over, their survival is at risk by the travel bans, shop closures and prohibition of assemblies.
The government has earmarked 550 billion euros ($600 billion) to protect companies and workers. Finance Minister Olaf Scholz said Wednesday he stands by his plans to invest record sums in infrastructure and climate policies — even as the virus risks throwing over carefully crafted budget prospects.
The ECB, for its part, launched an extra emergency bond-buying program worth 750 billion euros in the latest attempt to calm markets and protect the euro-area economy.
“The entire global economy could face a deep crisis, the exact dimensions of which cannot yet be predicted,” said Marcel Fratzscher, President of the DIW Institute. “The important thing now is to provide financial aid quickly and without red tape.”