German economists call for more spending to tackle coronavirus
Leading German economists have called on Angela Merkel’s government to increase spending and defer taxes to tackle the economic fallout from coronavirus.
Germany agreed a package of measures on Sunday night that aim to help companies struggling with disruption to supply and demand and include €12.4bn (£10.9bn) in state investment.
In a letter to Chancellor Merkel, the economists said they support the measures, but add that the “need is already there for more far-reaching steps”.
The signatories include former Council of Economic Experts member Peter Bofinger, president of the Kiel Institute for the World Economy Gabriel Felbermayr, Ifo Institute President Clemens Fuest, and the Director of the German Economic Institute Michael Huether.
They said that “everything possible must be done to avoid liquidity bottlenecks for companies that either suffer a drop in sales or have to cope with production interruptions”.
They recommend “the general interest-free deferral of advance and back payments of income tax, corporation tax, and VAT”. They added that there is “plenty of potential for German fiscal policy to stabilise the economy, not least in light of its low debt ratio by international standards”.
The letter came after Merkel warned her colleagues that 60 to 70 per cent of Germany’s population could contract coronavirus, according to German newspaper Bild.
Coronavirus – now officially called Covid-19 – has now infected more than 116,000 people around the world and killed more than 4,000. The majority of deaths have been in China, where the virus originated.
Economies around the world are set to slow significantly due to the virus as people self-quarantine and spend less money, and factories and offices close.
Germany on Monday announced liquidity support for companies suffering from cash-flow issues and widened access to a scheme designed to avoid a rise in unemployment.
But the group of leading economists today said the support could be “possibly insufficient”.