Germany’s Olaf proposes $12bn plan to ensure jobs

Bloomberg

German Finance Minister Olaf Scholz proposed extending job-preserving subsidies during the coronavirus crisis to 24 months, saying the measure would cost the government an extra $12 billion.
Chancellor Angela Merkel’s government re-launched short-time compensation to shield workers and companies in Germany from massive job cuts during the pandemic. The benefit, normally limited to 12 months, initially covers as much as 67% for households with children and gradually increases over the months.
Scholz’s proposal contrasts sharply with the intention of Chancellor of the Exchequer Rishi Sunak to end the UK’s coronavirus jobs-support program in October. The Institute for Public Policy Research estimates that 3 million workers will still be relying on the plan when it ends. So far, the program has cost the Treasury
almost $46 billion.
Asked during an interview with Bild late on Sunday whether the cost of the extended coverage would be closer to 100 billion euros or 10 billion euros, Scholz said “around the latter possibility – somewhat less.”
Europe’s largest economy has weathered the pandemic relatively well and is projected to expand strongly in the third quarter. At the same time, the number of new coronavirus cases has accelerated in recent weeks, prompting fears that a fresh wave of infections could lead to renewed restrictions on economic activity.
The Social Democrats, the junior partner in Merkel’s coalition, last week launched Scholz as their candidate to run for the country’s top job in next year’s general election.
Germany’s number of short-time workers is several times higher than during the 2008 to 2009 recession caused by the global financial crisis, though Ifo institute economists estimate the number fell to 5.6 million in July from about 7 million in May.

Industrial output rises in June
Industrial output in Germany —the region’s biggest economy —rose at a faster-than-expected pace of 8.9% in June, and factory demand is also increasing. With France and Spain experiencing similar trends, signs are mounting that Europe’s initial bounce-back from the worst recession in living memory may be faster than anticipated.
Euro-area retail sales have already made up for the ground lost during lockdowns, and German trade indicators are now also signalling a revival. The figures, however, will do little to change expectations of a long road to full recovery.
“Although the industrial recovery has further to run, we now expect more moderate growth rates,” Morgan Stanley economists Jacob Nell, Markus Guetschow and Joao Almeida wrote in a note. Risks are “tilted to stagnation or renewed contraction if rising infection rates trigger a more cautious consumer response.”
In Germany, the rise in infections is already worrying government officials. The trend in new cases is going “in completely the wrong direction,” Economy Minister Peter Altmaier said on Friday, highlighting concern among officials in the ruling coalition about a resurgence of the disease.
Renewed trade tensions between the US and China —two of the region’s major export markets —could also disrupt the rebound. European Central Bank Chief Economist Philip Lane has already cautioned against any premature optimism, arguing that the third quarter will be key to determining the strength and
sustainability of the recovery.