Germany Prepares EUR 750 Billion to Help the Economy

Germany on Monday agreed a package worth up to 750 billion euros (USD 808 billion) to mitigate the damage of the coronavirus outbreak on Europe’s largest economy, with Berlin aiming to take on new debt for the first time since 2013.

– That’s a very big package with a lot of measures – Finance Minister Olaf Scholz told a joint news conference with Economy Minister Peter Altmaier, adding that Germany would double the number of beds in its intensive care units, Reuters reports.

The federal government’s supplementary budget of 156 billion euros, which will be financed with new borrowing, underlines Berlin’s determination to use “all we have” to reduce the impact of coronavirus, Scholz said.

The government now expects the pandemic to plunge the economy into recession, with Scholz saying his budget plans were based on the assumption that gross domestic product would fall by roughly 5% this year.

Altmaier said the government wanted to get aid to companies as quickly as possible and that Berlin was ready to protect firms from insolvency as well as unwanted takeovers during the crisis with a newly created Economy Stabilization Fund.

– We’re determined to protect our companies and jobs – Altmaier said, adding that this message was directed at hedge funds.

The cabinet earlier on Monday approved a raft of measures, including the stabilization fund draft law that foresees funds of up to 100 billion euros which can be used to take direct equity stakes in companies as a way to foil foreign takeovers.

The package includes another 100 billion euros in credit to public sector development bank KfW for loans to struggling businesses.

The government will give the KfW bank debt authorization for both measures worth 200 billion euros. This means that overall new borrowing could rise to up to 356 billion euros this year, depending on how much companies are making use of the tools.

The combined sum of new debt represents roughly 10% of Germany’s gross domestic product

The stability fund will offer 400 billion euros in loan guarantees to secure corporate debt at risk of defaulting, taking the volume of the package to up to 750 billion euros.

German Finance Ministry

German Economy Ministry

KfW bank

Olaf Scholz

Peter Altmaier

state financial help to the economy

coronavirus

Covid 19

hedge funds

help to private companies

corporate credits