Virus Forces Half of German Firms to Rely on State Aid, Ifo Says

(Bloomberg) --

One half of all German businesses are using a state wage-support program to get through the coronavirus pandemic, according to a survey showing the extent that shutdowns have hurt Europe’s largest economy.

The highest proportion of people working reduced hours for state-supported wages are in retail, where 55% of workers rely on the program, according to the survey conducted by the Ifo economic institute.

“For many companies, state wage support is a way for companies to cushion short-term sales declines and keep their workforce,” Klaus Wohlrabe, who ran the survey, said in a statement. Even so, almost one-fifth of employees are looking at job cuts.

Germany’s ruling coalition late on Wednesday agreed to a 10-billion-euro ($10.8 billion) package of measures meant to dampen the impact of the pandemic. The package includes a temporary increase of the money paid through state wage support to as much as 87% of workers’ salaries.

Finance Minister Olaf Scholz on Thursday said wage support measures played a key role during the financial crisis just over a decade ago in protecting German jobs while other nations suffered, and that extending the program will make the economy more resilient.

The government expects German output to decline by at least 5% this year.

©2020 Bloomberg L.P.

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