Germany plans €17 billion aid to companies and freelancers for extended shutdown

The German government plans to set aside a massive aid package for firms and self-employed people this December.

Germany plans €17 billion aid to companies and freelancers for extended shutdown
A woman walking past a restaurant in Hanover on Monday. Photo: DPA

It came as negotiations continued ahead of crunch talks between the government and the states.

Under the state premiers' proposals, the partial lockdown across Germany will be extended until December 20th.

A final decision is expected to be taken during the consultations with Chancellor Angela Merkel and the states on Wednesday.

If the partial lockdown is extended, restaurants, bars and cafes as well as leisure and cultural facilities – which have been closed since November 2nd – will remain shut.

READ ALSO: Groups of 10 and no fireworks ban – German states propose Christmas and New Year rules

Will there be financial support?

The government has promised support to companies affected by the closures.

So far authorities have earmarked around €14 to €15 billion to compensate for lost turnover in November.

The support is for affected businesses, such as bars and restaurants or self-employed artists.

Companies with up to 50 employees and self-employed people are to be compensated for 75 percent of the loss of turnover, based on their November 2019 takings. For larger companies, the percentages are determined in accordance with European guidelines on state aid law.

The application process for claimants is expected to begin over the course of this week, and the funds are to be allocated to those affected by the end of the month.

The money is to come from a pot set aside for ongoing 'bridging aid' during the pandemic.

The Pino restaurant in Frankfurt has turned to showcasing pandas instead of customers as part of their 'Pandamie' bears protest on the shutdown. Photo: DPA

It is not yet clear what the new aid for December will look like. According to reports, the December financial aid would be based on the model of the November package, and worth around €17 billion.

However, it's unclear whether a 75 percent loss of turnover will be granted again.

'Reserves have been used up'

The federal government has already taken on huge debts to protect companies and jobs during the coronavirus crisis.

Business representatives say the support is badly needed to keep the economy ticking over. They are also worried about the November aid reaching people.

“Extending the November aid is important in order to give businesses a chance of survival. The reserves have been used up,” said Ingrid Hartges, the chief executive of the hotel and catering industry association Dehoga, on Tuesday.

“We need concrete information, including details of the November aid, when the money will be paid out, because not a cent has been paid out yet. The fact that the closures will now continue until December 20th naturally exacerbates the situation”.

The Federal Association of Small and Medium-sized Enterprises (Bundesverband mittelständische Wirtschaft) called for improvements to the support process.

This mainly concerns companies that are indirectly affected by closures, for example in the catering industry. Federal Managing Director Markus Jerger said that the federal and state governments must finally make a binding declaration on how the aid for ailing companies should be paid out in November and continued in December without red tape.

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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.