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Denmark offers companies $6bn in coronavirus cash hand-outs

Denmark's finance ministry has announced plans to spend up to 40bn Danish kroner ($6bn) to help companies hit by the coronavirus crisis to cover their fixed costs until cash flow resumes.

Denmark offers companies $6bn in coronavirus cash hand-outs
Nicolai Wammen arrives for the press conference on Wednesday. Photo: Niels Christian Vilmann/Ritzau Scanpix
Under the scheme, companies who have seen their revenues decline by 40 percent or more, will receive government grants to help cover between 25 to 80 percent of their fixed costs. 
 
The self-employed and firms with up to ten people who see their revenues fall more than 30 percent will also be offered government compensation worth 75 percent of their normal monthly income — up to a maximum of 23,000-a-month. 
 
The two grants will be available for three months, after which the hope is that the economy will be able to return to normal. 
 
“These are measures that have never been seen before. It is extraordinary,” Finance Minister Nicolai Wammen said as he announced the measures, according to the public broadcaster DR.  “We are not talking about loans. These are cash hand-outs.” 
 
The two measures come on top of the government's decision to defer as much as 125bn Danish kroner of companies' tax and VAT payments, and its decision to pay between 75 percent and 90 percent of the salaries of employees businesses send home during the crisis. 
 
It has also released banks' countercyclical capital buffer, freeing up 17bn kroner in potential liquidity. 
 
The latest measure has been welcomed by business, but has drawn criticism from some economists. 
 
“It's almost completely crazy that a Danish government can just spend 40bn kroner without any further investigation or much debate,” said Las Olsen, the chief economist at Danske Bank, told Denmark's Jyllands-Posten
 
“These are completely unheard of steps that the government is now taking,” Helge J. Pedersen, chief economist at Nordea, told the magazine. “This is significantly more than fiscal policy was expanded during the 2008-09 financial crisis.” 

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COVID-19

Court turns down AfD-led challenge to Germany’s spending in pandemic

The German Constitutional Court rejected challenges Tuesday to Berlin's participation in the European Union's coronavirus recovery fund, but expressed some reservations about the massive package.

Court turns down AfD-led challenge to Germany's spending in pandemic

Germany last year ratified the €750-billion ($790-billion) fund, which offers loans and grants to EU countries hit hardest by the pandemic.

The court in Karlsruhe ruled on two challenges, one submitted by a former founder of the far-right AfD party, and the other by a businessman.

They argued the fund could ultimately lead to Germany, Europe’s biggest economy, having to take on the debts of other EU member states on a permanent basis.

But the Constitutional Court judges ruled the EU measure does not violate Germany’s Basic Law, which forbids the government from sharing other countries’ debts.

READ ALSO: Germany plans return to debt-limit rules in 2023

The judgement noted the government had stressed that the plan was “intended to be a one-time instrument in reaction to an unprecedented crisis”.

It also noted that the German parliament retains “sufficient influence in the decision-making process as to how the funds provided will be used”.

The judges, who ruled six to one against the challenges, did however express some reservations.

They questioned whether paying out such a large amount over the planned period – until 2026 – could really be considered “an exceptional measure” to fight the pandemic.

At least 37 percent of the funds are aimed at achieving climate targets, the judges said, noting it was hard to see a link between combating global warming and the pandemic.

READ ALSO: Germany to fast-track disputed €200 billion energy fund

They also warned against any permanent mechanism that could lead to EU members taking on joint liability over the long term.

Berenberg Bank economist Holger Schmieding said the ruling had “raised serious doubts whether the joint issuance to finance the fund is in line with” EU treaties.

“The German court — once again — emphasised German limits for EU fiscal integration,” he said.

The court had already thrown out a legal challenge, in April 2021, that had initially stopped Berlin from ratifying the financial package.

Along with French President Emmanuel Macron, then chancellor Angela Merkel sketched out the fund in 2020, which eventually was agreed by the EU’s 27 members in December.

The first funds were disbursed in summer 2021, with the most given to Italy and Spain, both hit hard by the pandemic.

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