News Digest 3rd April

Corona crisis

The number of infections rose from 47,500 last Friday to around 85,000 this Friday. The government scientific institute, the Robert Koch Insititute, predicted that the number of deaths (currently at around 1,100) would continue to rise.

Many states introduced harsh fines for people disobeying the social distancing restrictions this week. The fines are partly intended to stop people travelling for the Easter holidays. Fines are mostly around 500 euros, but rise to as much as 25,000 is extreme case, reported the Welt.

So far, the health system is coping. The number of ventilation units has been increased from 20,000 to 30,000 in the last few weeks and so there was still capacity in the system, enabling German hospitals to take in patients from Italy and France. On Monday, 7,000 people with Covid-19 were being treated in hospital, 1500 of whom were in intensive care units and 1100 ventilated. By Thursday morning, 45% of the intensive beds were occupied, according to Health Minister Jens Spahn, and construction of a new 1,000 bed corona hospital in Berlin was underway.

Germany is attempting to increase the number of tests being carried out to 200,000 per day as part of the strategy to track and contain the infections. Currently the country is carrying out about 50,000 a day.

The aim of 200,000 tests a day by the end of April came from a leaked strategy paper commissioned by Interior Minister Horst Seehofer (CSU). The paper discussed a worst-case scenario in Germany, with 70% of the population becoming infected, 80% of intensive care patients turned away, and more than a million deaths. With an increase in testing to 200,000 a day, tracking of infections and on-going restrictions on movement, infections could be cut to a million and deaths to 12,000. The paper looked to the example of South Korea, which has managed to control the outbreak with mass testing.

President Frank-Walter Steinmeier and four other country leaders called for a truly global alliance to fight the coronavirus pandemic in a letter published by the FT, including rapid testing and vaccines, especially to protect vulnerable populations.

Foreign Secretary Heiko Maas has promised to bring back all Germans stranded abroad, and 175,000 German tourists had been flown back by the end of this week. However, the Berliner Morgenpost reported that tens of thousands of Germans were still waiting in countries such as Morocco, Tunisia and Cameroon, which have shut borders and blocked airspace, and that a thousand German tourists are still waiting to be flown out of India. The Tagesschau reported that around 12,000 were stranded in New Zealand alone.

Health Minister Jens Spahn (right) and NRW Prime Minister Armin Laschet

Green Party leader Robert Habeck has called for the evacuation of the overcrowded refugee camps on Lesbos and other Greek islands, warning that, “If the corona virus breaks out in the camps, this will have catastrophic consequences. Habeck said that,”other Europeans, including Germany, should help. This includes the acceptance of children that has already been agreed.”

There were extraordinary reports late Friday afternoon that the USA had actually diverted 200,000 protective masks ordered by the Berlin state government; it was alleged that the masks had been intercepted on their way from China in Bangkok and sent to the USA. The Tagesspiegel quoted Berlin’s Senator for the Interior as saying “We consider this an act of modern piracy. This is not how you deal with transatlantic partners.”

Corona exit strategy

It has been over three weeks since normal life started to grind to a halt, and the government announced that the near-lockdown restrictions announced on 22nd March would continue until after Easter.

In a message from quarantine, Chancellor Merkel said, “I have to ask you to be patient”

The head of the Chancellery, Helge Braun, confirmed that the lifting of restrictions would not be discussed before April 20th. Infections were doubling every three – five days at the beginning of the week, but by the end of the week the rate was slowing down to 9-10. Braun said, “If we manage to slow the rate of infection so that it takes ten, twelve or more days for cases to double, then we know we’re on the right track.” On Friday evening, Angela Merkel confirmed that the rate of infections was slowing down, but said it would be irresponsible to set a date for the end of restrictions and then not meet expectations: “We would go from the frying pan into the fire — medically, economically, socially.” 

Several key figures, including North Rhine Westphalia Prime Minister and CDU leadership candidate, Armin Laschet, have called for an earlier discussion than Braun indicated. Laschet said, “The sentence that it is too early to think about an exit strategy is wrong.”

Amidst growing concerns about the effect of the restrictions on the economy and on mental health, talk has turned to what the government’s exit strategy will be.

There have been calls to lift the restrictions immediately after Easter, because of the effect on the ecomomy. Finance Minister Olaf Scholz rejected any easing of the measures on economic grounds: “I oppose any of these cynical considerations that people have to accept death in order for the economy to run…..Such assessments are insupportable.” Scholz also strongly criticised President Trump’s statement that the measures taken to curb the corona pandemic would be eased again in just over two weeks. Scholz said, “I am horrified by what the US President says. As a fellow human being you have to feel with the Americans.”

Tracking of infections is being widely discussed as part of the exit strategy – this could be done using satellite systems such as GPS or Galileo which can determine position. Tracking contact with infected people could limit the number of potentially infected people and so the relaxation of the current rules could be less risky. Because of data protection, the most viable solution for this is an app in which consumers voluntarily release their position data (so far, the government has only had access to anonymous data). However, the Tagesschau reported that the federal data protection officer has warned that data protection is sometimes being neglected in other countries and that there is no evidence that the individual location data could help determine contact persons, because that data is too imprecise.

The Times also reported on another key discussion in Germany now – antibody testing: it is hoped that 100,000 tests will have been done by the end of April and those with an immunity could be given a vaccination passport that allows them to be exempted from the restrictions that others are subjected to.

There have also been calls for other ways of ensuring people can get back to work, such as an obligation to wear face masks when out, as is being introduced in the town of Jena: it is argued that this could offer small businesses the opportunity to reopen and sell goods and thus avoid impending bankruptcies. WHO has advised against using face masks, since there is no indication they will prevent the spread and there are additional risks if people remove the masks incorrectly. Earlier in the week, key figures such as Health Minister Jens Spahn and Armin Laschet said they were against making mask-wearing obligatory, since masks need to be kept in supply for hospital and care workers. However, on Thursday, official advice changed, with the Robert Koch Institute recommending they be worn.

Effect on the economy

There have been different predictions about the effect of the corona virus on the economy. The Spiegel discussed a report by the government Council of Experts which had some slightly more optimistic predictions than last week’s from the Ifo Institute. The advisers examined three scenarios, represented by three letters to illustrate the shape of the crash: small v, large V, and a U.

Under the small v scenario, the shutdown would last five weeks and then it would take three weeks for the economy to start up again. GDP would collapse as drastically as during the global financial crisis in 2009. However, the economic situation would normalise again over the summer, and the economy would start to run smoothly again in the third quarter. In 2020 the economy would shrink by 2.8%, but in 2021, growth will increase sharply, to over 3.7%.

Under the large V scenario, there would be a deeper crash. If the shutdown is extended to seven weeks, the slump would be almost twice as strong: in 2020 the economy would shrink by 5.4% percent. The recession would be followed by 4.9 percent growth in 2021. However, it would take until 2022 for the losses to be made up again.

Under the U scenario, if the shutdown continues beyond the summer, there would be a deep crash and a sluggish recovery. This could happen in the case of uncertainty, which would cause “braked investments” and consumer reluctance to spend. In 2020 the economy would shrink by 4.5 percent – and grow very slowly at 1.1 percent in 2021.

A survey conducted by the Federal Association of Wholesale, Foreign Trade and Services (BGA) for the Handelsblatt found that almost every second wholesaler and foreign trader (a branch that generates annual sales of 1.3 trillion euros) saw themselves as “existentially affected” by the corona crisis.

The Deutsche Welle reported that the European Union is preparing for a severe recession and that leaders are divided in their reponse: “Italy and Spain want eurozone bonds, a debt mutualization instrument that could help bring down their borrowing costs and ease access to funds. They are backed by France, but Germany, the Netherlands and Austria oppose the move.” The Zeit reported on the ‘the bad Germans are back’ feeling in Italy – many in Italy have been outraged by the EU and the Germans for perceived lack of help during the crisis, “Criticism of the EU – in Italy this is often criticism of its most powerful member, Germany.” This feeling is being whipped up by the populist right, but the paper quotes one diplomatic observer as saying that aversion to the Germans is “creeping into the centre of society and the political spectrum.”

The crisis has put enormous pressure on those trying to protect the economy and people’s livelihoods. On Sunday, it was reported that the Finance Minister of Hesse, Thomas Schäfer, had been found dead. Hesse’s Prime Minister Volker Bouffier spoke about the high burden that had been placed on Schäfer during the corona crisis and said, “I have to assume that these worries overwhelmed him….. he was desperate and left us.”

Employment Minister, Hubertus Heil said that 470,000 companies have applied for ‘Kurzarbeit‘, (when companies can temporarily reduce workers’ hours and the state replaces between 60% – 67% of their income). Heil has said that Kurzarbeit will enable millions of people to keep their jobs, but warned that unemployment will increase and that not every job can be protected. Heil has also called for better pay for the key workers who have kept the economy going during the corona crisis.

As in the UK, there has been discussion about companies who have not behaved well over the corona crisis. Some large companies have taken advantage of a new law from the ‘Corona package’ which says that individuals and companies cannot lose their rental contracts if they stop paying rent. But companies such as Adidas, H&M and Deichmann, which have large profits, have stopped paying rent for their shops. An article in the Berliner Morgenpost argued that at the end of 2019, Adidas had sales of over 23.6 billion and earned around two billion euros: “This would surely pay the rent for the month of April. The company’s ruthless action will start an economic infection chain that could spread to landlords and investors and from there to many other areas of our economy.” Hubertus Heil said he was furious, saying that those countries which have profited from the good economic times “have an obligation not to put their interests first.”

Due to concern in the agriculture sector, which urgently needs seasonal workers from abroad to pick crops, the government lifted its ban on seasonal workers. Farms will now be able to bring in 80,000 workers in April and May.

Meanwhile, the FT reported that Volkswagen is still aiming to deliver its ID.3 mass-market electric car in August despite the current shutdown. Volkswagen “is bound by strict EU-wide emissions regulations and could face large fines if it fails to sell enough battery-powered vehicles in 2020.”

Political fallout

As reported last week, the corona crisis has brought about an astounding revival in the fortunes of the coalition government. The government is delivering a 1.2 trillion euro aid package and public opinion approves of the way the crisis is being handled. The CDU has risen from a low of 26% three weeks ago to as high as 36% in one poll. The SPD has risen only a few points, to around 16%, although Olaf Scholz has high approval ratings.

The ZDP Political Barometer showed that 89% of people surveyed thought the government was doing a good job. Merkel is is top place for satisfaction with individual politicians, followed by Bavaria’s Minister President Markus Söder, Health Minister Jens Spahn and Finance Minister Olaf Scholz.

An excellent article from the FT about Merkel and how she has come back as the nation’s crisis manager can be found here: “Cometh the hour, cometh the Merkel, her supporters say. Strongmen and showmen might have their uses during peacetime, but in a pandemic, with the economy in a downward spiral and millions afraid, you need a cool head.”

The losers have been the Greens and the far-right Alternative for Germany (AfD); the AfD has struggled with accusations of right-extremism and has had little to say about the corona crisis – most of its members abstained in the vote on the ‘Corona package’ in the Bundestag last week. One of the party’s national leaders, Jörg Meuthen, even initiated a discussion this week about splitting the party into two. However, the AfD’s vote in the east of the country remains strong.

Investigation into Hanau shootings

The Frankfurter Allgemeine reported that the Federal Criminal Police Office (BKA) investigation into the shootings at two shisha bars in Hanau in February is working on the theory that the shootings may not have been a result of right-wing extremism, as had been reported. It is thought that the shooter, Tobias R., chose his victims to get as much attention as possible for his conspiracy myth of being monitored by a secret service and did not go through a typical right-wing extremist radicalization.

Politically motivated crime

The Spiegel reported that in the east German state of Thuringia, which had an election in October last year, leading to a political crisis in March, a high level of politically motivated crime was recorded in 2019. 2,493 politically motivated crimes are committed, an increase of nearly 40%. More than a third were committed during the election months of May (European elections) and October (state election).

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