Coronavirus and Germany

• Eased Restrictions for Vaccinated or Recovered Persons
• Federal Emergency Brake
• Covid-19 testing
• General Corona guidelines and restrictions
• Useful further information

Eased Restrictions for Vaccinated or Recovered Persons

The German parliament has approved a COVID-19 Protective Measures Exemption Ordinance that introduces eased restrictions for fully vaccinated or recovered persons.

From May, 9 2021, current contact restrictions and curfews will no longer apply to this group. Furthermore, these persons will not not be required to comply with quarantine obligations for instance after travel - unless they are returning from a designated area of variant of concern.

Vaccinated and recovered persons will also be treated on the same basis as individuals who have provided a negative test for certain exceptions to the current protection measures. This means, for example, that they do not have to present a current negative test result in order to go to the hairdresser.

The obligation to wear a medical mask and maintain distance remains in place for everyone. For details about the lifting of restrictions, please refer to the dedicated website of the Federal Government.

Federal Emergency Brake

An amendment to the Infection Protection Act (IPA) has been passed. The individual federal states had primarily been responsible for determining the type and range of measures to be taken to contain the pandemic - generally on the basis of a joint decision following consultations between the federal states and the German federal government.

Under the amendment, these measures will continue to apply up to a 7-day incidence rate per 100,000 inhabitants. Should the 7-day incidence rate in a region exceed 100 on three consecutive days, the federal government will be able to unilaterally impose restrictions as of the following day - the "Federal Emergency Brake Regulations." The restrictions include a large number of individual measures designed to significantly reduce contact.

Federal Emergency Brake Regulations

For details about the new regulations, please refer to the dedicated website of the Federal government.

Individual federal state regulations that are currently more relaxed than those in the amended IPA may no longer apply. Stricter regulations may however be introduced.

Covid-19 testing

From April 20, 2021, employers are required to offer employees who cannot work from home a weekly Covid-19 test. Groups of employees who face a higher risk of infection are to be offered twice weekly tests. To reduce contact at work places and on public transportation, employers must - wherever possible - enable their employees to be able to work from home until June 30, 2021.

A majority of federal states have already  introduced mandatory coronavirus testing in schools. All asymtomatic citizens will also have the opportunity to take one rapid antigen test every week free of charge.

General Corona guidelines and restrictions

• Social distancing and reducing contact to the absolute minimum necessary remain the most important measures.
• It is mandatory to wear medical masks (i.e. surgical, FFP2 or KN95 masks) in public transport and in shops.
• Non-essential travel remains prohibited and hotels forbidden from accommodating tourists.
• Restaurants, cafés and bars are restricted to take-away service only.

Urgent business travel is still permitted and Germany's borders remain open.

Useful further information

For details of the extended restrictions, please refer to the dedicated website of the German federal government.

Additionally, the special information website for the Corona virus provided by the Federal Ministry of Health offers useful information.

• Effects on the German Economy
• European Commission – country back on economic track by 2022
• Record package of financial support measures
• Global recovery only possible when coronavirus is contained
• Global FDI Perspectives

Effects on the German Economy

Although the German economy has been affected by the coronavirus pandemic, Germany’s economic downturn will be less severe than previously expected. The Federal Government's comprehensive and rapid support since the beginning of the crisis has been effective to date.

Although Germany is still in a partial lockdown, there is reason to be optimistic. The German economy assesses its current business situation more positively again. Orders in the industrial sector are rising and  job levels are similarly on the increase.

According to new data from the Federal Ministry for Economic Affairs and Energy, Germany’s GDP fell by 4.9 percent in 2020. Earlier forecasts predicted a GDP slump of at least 6.3 percent. Despite the economy still remaining in semi-lockdown at the beginning of 2021, the ministry forecasts GDP growth of 3.5 percent for the year.

European Commission – country back on economic track by 2022

According to the European Commission, large catch-up and carry-over effects in 2021 and 2022 should buoy the German economy, with projected GDP increases of 3.2 percent and 3.1 percent respectively - allowing Germany to reach its pre-crisis level in 2022. 

Record package of financial support measures

Germany’s government moved swiftly to counteract the worst effects of the crisis, introducing a far-reaching package of financial measures to safeguard health, jobs and the economy. The record aid package includes a supplementary government budget of EUR 156 billion to absorb the immediate consequences of the crisis. The complete program of help measures – including guarantees and subsidized KfW bank loans – planned represents EUR 1.2 trillion in total. By moving quickly and decisively to mitigate the worst outcomes of the crisis, Germany’s government has created the conditions to ensure that businesses – of all sizes – emerge from the crisis intact. 

Germany was one of the safest investment locations worldwide before the global coronavirus pandemic. The country’s strong and stable economy now puts it on a strong footing to deal with the ongoing Covid-19 crisis. The record financial aid package– with further measures foreseen as and when required – is a sign of the German government’s commitment to ensuring that the country maintains its proud position.

Global recovery only possible when coronavirus is contained

A global recession now seems certain, with economic recovery only possible when the virus can be effectively contained. According to the OECD, a sharp slowdown in world growth was expected for the first half of the year as supply chains and commodities were affected, tourism fell away and business confidence faltered.

Global FDI Perspectives

UNCTAD reports that the outbreak and spread of Covid-19 will negatively affect global foreign direct investment (FDI) flows for the period 2020-2021. Downward pressure on FDI resulted in a drop of 42 percent of FDI inflows worldwide, hitting developed countries (-69 percent) the most. Another drop of five to ten percent of FDI inflows is expected for 2021.

Despite the severe global economic downturn caused by Covid-19 in 2020, FDIs in Germany dropped by 9 percent compared to the previous year. The number of greenfield projects in Europe, for example, saw a decrease of only 15 percent in 2020. In its new FDI Reporting Report for 2020, Germany Trade & Invest recorded 1,684 FDI projects in Germany. Germany’s reputation as Europe’s most attractive business location helped to keep the slump within limits and generate a better result than expected.

• The economic stimulus and crisis management package
• Support for small and medium-sized companies
• Liquidity aid loan programs
• More flexible rules for short-time allowance schemes
• Tax policy measures

The country’s economy is in a strong position to introduce measures supporting the economy over a prolonged period. By providing businesses with sufficient liquidity, the government measures will help ensure that enterprises emerge from the crisis intact.

The economic stimulus and crisis management package

The German federal government has agreed on an economic stimulus package worth EUR 130 billion. The program (Future Package) includes a number of measures to foster economic growth and investment in Germany.

Foreign investors wishing to invest in Germany can benefit in particular from funding in the areas of mobility, medical devices, CO₂ reduction, digitalization and artificial intelligence. 

All measures will improve the general environment for companies, ensuring Germany remains highly attractive to foreign investors.

Support for small and medium-sized companies

As of September 1 2020, small and medium-sized companies and freelance workers from all areas of business are entitled to non-repayable liquidity aid grants - called a "bridging allowance" -  from the German government for the months up to June 2021. 

Companies must apply using a registered accountant or tax advisor. The aid is designed to cover fixed costs of businesses which remain locked down, or remain significantly impacted despite the partial opening of some economic sectors.

The bridging allowance reimburses a share of:

• 90 percent of fixed costs for companies with more than 70 percent decline in revenue,
• 60 percent of the fixed costs for companies with a decline in sales between 50 percent and 70 percent,
• 40 percent of fixed costs for companies with​ a decline in sales between 30 percent and less than 50 percent

in the month of aid distribution compared to the revenues of the corresponding month of the previous year, up to a maximum of EUR 50,000.

Companies directly affected by the second lockdown in November and December who were forced to stop operating, or their suppliers who lost more than 80 per cent of revenue from the stop in operations, may claim up to 75 percent of year-on-year revenue.

In January 2021, the bridging allowance has been revised (bridging allowance III):

Applications can be made by all companies with up to EUR 750 million turnover in Germany. The company must have had a decline in sales of at least 30 percent in one month compared to the same month of 2019. The maximum amount of financial support is EUR 1.5 million per month.

In case of a decline in turnover of between 30 and 50 percent, the company will receive a subsidy of 40 percent of its eligible fixed costs of the respective month. A loss in turnover of 50 to 70 percent will lead to a subsidy of 60 percent of the eligible fixed costs, and a loss in turnover of more then 70 percent will be aided with 90 percent of the fixed costs.

Special rules apply to certain industries which are severely impacted such as the clothing retail sector.

​Further information, including exclusion criteria, is provided here (in German only).

Liquidity aid loan programs

The federal development bank KfW has expanded and eased access and terms on two existing loan programs:

• the ERP-Universal Start-up Loan
• the KfW-Entrepreneur Loan

KfW has introduced a variety of special programmes to suit companies of different sizes and ages. These programmes include generous terms and conditions on consortial financing for larger projects, as well as emergency liquidity aid for SMEs, micro-enterprises and freelancers/self-employed persons experiencing financial difficulties as a result of the corona crisis.

Please refer to the KfW website for details on loan program conditions. Applications for all these can be made through high-street banks.

At the same time, both federal and state governments are setting up a variety of aid programs to support companies in Germany. The range of services is continuously being updated and expanded. The Federal Ministry for Economic Affairs and Energy provides an overview of all state programs (so far in German only). If you have any questions, please do not hesitate to contact us.

More flexible rules for short-time allowance schemes

The Federal Employment Agency pays the short-time allowance as partial compensation for a loss of earnings caused by a temporary cut in working hours. This reduces the costs faced by employers in the context of employing workers, and enables companies to continue to employ their workforce even in the event of a loss of orders. In other words, short-time allowances help to prevent dismissals.

Currently short-time allowances schemes can be granted on a more flexible basis for a limited period until December 31, 2021. For instance, companies are eligible to apply, if 10 percent of the employees are effected by shorter working hours. Moreover, social security contributions which have to be paid solely by employers for employees working short-time are reimbursed in full until June 2021.

Tax policy measures

Tax measures improving companies’ liquidity situations have been decided. For instance, options for deferring tax payments and reducing prepayments will be enhanced. Enforcement rules will also be adapted - there will be no foreclosures or late payment fines, if the debtor of a pending tax payment is directly affected by the coronavirus.