Corona Crisis and Germany

• 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 - of up to EUR 150,000 from the German Government for the months up to the end of 2020 (this may be extended).

Companies must apply using a registered accountant or tax advisor and must have revenues down 60 percent relative to the corresponding months' revenues in 2019. The aid is designed to cover fixed costs of businesses which remain locked down, or remain significantly impacted despite the lockdown easing. 

The bridging allowance reimburses a share of:

• 80 percent of fixed costs for companies with more than 70 percent decline in sales,
• 50 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 40 percent and less than 50 percent

in the month of aid distribution compared to the corresponding month of the previous year.

​Further information, including exclusion criteria, is provided by the Federal Ministry for Economic Affairs and Energy (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.

• Worst economic downturn in postwar period
• 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

Worst economic downturn in postwar period

The German economy experienced its worst recession in the postwar period as a result of the coronavirus pandemic. However, Germany’s economic downturn will be less severe than previously expected. The country is again doing its best to halt the spread of Covid-19 as cases rise again.

Germany’s relative success in containing the coronavirus during the summer paid economic dividends, with the low point of the recession already passed in May. Since then, the monthly indicators have shown clear signs of recovery.

Gross domestic product increased by 8.2 percent in Q3/2020 compared with Q2/2020. This growth was driven by higher private consumer spending, increased investment in equipment and a sharp rise in exports.

European Commission – country back on economic track by 2022

According to new data from the European Commission, Germany will experience a fall in GDP of 5.6 percent in 2020. Earlier forecasts predicted a GDP slump of at least 6.3 percent. In 2021 and 2022, large catch-up and carry-over effects should buoy the German economy, with a projected GDP increase of 3.5 percent and 2.6 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 in the period 2020-2021. Downward pressure on FDI will be in the range of 30 to 40 percent according to new forecasts. Developed countries in particular will feel the effect of this downturn as a result of their dependence on global supply chains.

Sectors expected to experience the greatest decline in FDI levels include aviation, tourism, entertainment, retail trade, and luxury goods. The automotive, consumer goods and IT sectors should experience minimal decline, with biotechnology, e-commerce, digital technologies, and y recording FDI increases according to some forecasts.

• Entry Regulations, Border Controls, Travel Restrictions
• National Guidelines to Slow the Spread of Coronavirus
• National Corona Warning App and European Platform

Entry Regulations, Border Controls, Travel Restrictions

Germany’s Federal Foreign Office has prepared important information relating to entry and travel restrictions, behavior when in Germany, and transit through other countries.

In order to prevent the further spread of the coronavirus, Germany  has implemented general travel restrictions for entry from outside the Schengen area. However, in line with the recommendations of the European Council, unrestricted entry to Germany is allowed from specific third countries with low infection rates. For up-to-date information and a list of all relevant countries, please refer to the dedicated website of the German Federal Ministry of Interior.

Travel to Germany from other third countries is also permitted in specific cases including for example:

• nationals from EU countries and associated Schengen countries and the UK,
• third country nationals with a valid residence permit for Germany,
• foreign experts and highly qualified personnel whose work is necessary from an economic point of view and which cannot be postponed or carried out abroad,
• third country nationals with specific essentials functions or needs.

The possibility to enter Germany depends on the place of departure and not the person’s nationality. 

Regardless of the possibility to enter the country, Germany has has a quarantine requirement in place for those returning to and entering Germany from regions designated by the Robert Koch Institute as being international risk areas within the last 10 days prior to entry. From November 8, 2020, all travelers to Germany from international risk areas must register online prior to their entry. Travelers must present proof of the registration when entering Germany.

• After arriving at their destination in Germany, the respective individuals must self-isolate at home for 10 days.
• If no other grounds for exception apply, these individuals may only be released from the obligation to self-isolate at home – no earlier than 5 days after entering Germany – if they provide proof of a negative test result.

For details about the quarantine requirements please refer to the dedicated website of the Federal Ministry of Health. 

The EU web platform ”Re-open EU”  provides up-to date information on borders, practical information on travel restrictions, and public health and safety measures for the EU member states.

National Guidelines to Slow the Spread of Coronavirus 

To protect individuals from infection, a minimum distance requirement of 1.5 meters and the use of masks in public spaces - especially in shops and on public transport - will remain in place until further notice.

In reponse to still high infection rates in Germany, the German federal government and the 16 federal states have decided to extend the restrictions in place from  November 2, 2020 through to December 20, 2020.

 Social distancing and reducing contact to the absolute minimum necessary remain the most important measures. Schools and kindergartens remain open, as do wholesale and retail businesses. Urgent business travel is permitted and Germany's borders remain open.

Non-essential travel is prohibited and hotels forbidden from accommodating tourists. Restaurants, cafés and bars are restricted to take-away service only. Recreational facilites like theatres, cinemas, and gyms are closed.

The federal states will implement additional measures valid from December 1, 2020. For instance, contact in public areas will be limited to two households encompassing a maximum of five people (children under 14 years of age are exempted). Masks will be mandatory in more places including outside shops and in car parks. The number of customers allowed inside shops at any one time will also be limited.

The federal government assumes that due to the high infection rates, comprehensive restrictions will be necessary until early January.   

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

For additional information on local restrictions, please check the rules that apply in the different federal states. For an overview of links to the federal states, please refer to the website of the federal government (only available in German language). Additionally, the special information website for the Corona virus  provided by the Federal Ministry of Health offers useful information.

National Corona Warning App and European Platform

The official Corona “Warning” App of the federal government has been available since June 16. The free app has been designed to enable contact tracing of infected persons in order to shorten the potential chain of infection. Use of the app is entirely voluntary, with the government promoting its broad use and promising a high level of data protection. Starting October 2020, European Union (EU) member states have launched a cross-border coronavirus tracing network using a shared platform that links different member state tracking apps.