German businesses are holding their breath awaiting the outcome of a meeting between chancellor Angela Merkel and the leaders of Germany’s 16 states on Wednesday afternoon.
With new daily coronavirus cases nearing 15,000 on Wednesday, and cases regularly surpassing 11,000 a day in the past week, the chancellor is pushing for what would amount to a second nationwide lockdown.
Merkel is aiming to get consensus from the states to shut restaurants, bars, gyms, theatres, cinemas in November to break the second wave of the virus. Business owners have warned that they may not survive another lockdown — and economists echo their fears, saying it would be a disaster for the German economy.
“It would be criminally naive to believe that the second lockdown is just a repetition of the first,” Michael Hüther, the director of the German Economic Institute wrote in business newspaper the Handelsblatt.
Commerzbank chief economist Jörg Krämer told Reuters that a second lockdown would snuff out GDP growth in the final quarter of the year, creating a “considerable risk” of a second recession.
“Many companies are still very weak because of the initial lockdown,” Krämer said. “You can't turn the economy on and off like a lamp without causing massive damage.”
Germany’s federal statistics bureau will release its preliminary third-quarter GDP data on 30 October. The economy contracted by 9.7% in the second quarter, and the government revised its 2020 forecast to 5.8% decline, from a previous forecast of a 6.3% decline.
Clemens Fuest, president of the Ifo economic research institute said: “There can be no economic recovery if the pandemic is not under control. There is no conflict between health and economic policy issues.”
The Ifo’s business sentiment index showed that company bosses were feeling a lot more pessimistic in October about the months ahead than they had been in August and September.
“The greatest damage to the German economy comes from a strong, long-lasting second wave of infections, not from targeted restrictions on daily life,” said Marcel Fratzscher, president of the German Institute for Economic Research. “The less the situation is under control the more confidence will suffer.”
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