Merkel Warns of Long Road Ahead in Europe’s Virus Crisis

(Bloomberg) -- Chancellor Angela Merkel warned the coronavirus crisis will get worse before it gets better and that the fallout will test Germany’s finances for months, if not years.

The long-time leader of Europe’s biggest economy was short on comforting words, saying that beating the disease hangs on the uncertain pace of developing and disseminating a vaccine, which could take 12 months or more. As the summer draws to a close and people are forced indoors, the situation is likely to get worse, she said during her annual summer press conference.

“I am firmly convinced that it is a good decision to take on a high degree of debt because anything else would mean we would be in the grip of the pandemic for a lot longer,” Merkel said Friday in Berlin. “In retrospect, I’m happy we didn’t succumb to the sweet poison of borrowing in good times,” giving Germany more resources to fight the crisis now.

Merkel’s comments reflect the reality of rising cases in many parts of Europe. Italy’s reported number increased for the third consecutive day to 1,462, the most since May 2. The daily positive-test rate was broadly stable at 1.5%. Having ruled out another national lockdown, the next challenge for Prime Minister Giuseppe Conte is to safely reopen Italian schools on Sept. 14.

Spain counted 3,829 new infections in data published Friday, the most since April 23. While France reported 7,379 new cases, the biggest daily increase since March 31, President Emmanuel Macron expressed confidence that the country can avoid a repeat of the lockdown that hammered its economy in the spring.

Greece’s government said it’s extending measures to stem the spread of the virus, including mandatory masks in enclosed spaces, for two more weeks.

‘Extraordinary’ Times

Merkel, who plans to step down after a national election in the fall of 2021, made it clear that the Covid-19 crisis will dominate the remainder of her political career. She thanked Germans for their sacrifices, while warning that more would be needed.

“There are indications that things will become more difficult in coming months,” she said. “It’s serious, unchanged serious. Continue to take it seriously.”

While Merkel has been praised for her handling of the pandemic, cracks have started to appear. She struggled to get state leaders aligned on response measures as infection rates rising again. On Thursday, the chancellor urged Germans to avoid travel to virus-hit areas like the U.S., and warned that restrictions on family gatherings may still come.

Merkel’s crisis management has been accompanied by her government’s historic decision to abandon its balanced-budget policy, suspending constitutional debt limits as part of a massive stimulus program. She was also a driving force behind the European Union’s recovery fund, which allows the bloc to pool borrowing for the first time.

“If extraordinary circumstances don’t make it possible to act in an extraordinary way, then you’re doing something wrong politically,” she said, adding that the pandemic will challenge Germany’s financial capacity because of the uncertainty over when it will end.

©2020 Bloomberg L.P.