Budget Deficit

Germany suffers highest deficit in 30 years due to Covid-19 pandemic

covid-19 pandemic.

Germany has seen its first deficit in 2020 since 2013 after the public sector deficit reached 189.2 billion euros ($225 billion) due to Covid-19 pandemic. 

The Statistics Office revealed that Germany had faced its first deficit since 2013. It is the highest budget shortfall since the German reconsolidation 3 decades ago. The Covid-19 pandemic has so far claimed more than 77,000 lives in Germany, has devastated and distressed the Europe’s largest economy, even though it has proven harder than many expected, relatively because of continuing strong export demand from China. 

Moreover, the statistics office said on Wednesday that public spending rose 12.1% to 1.7 trillion euros in 2020 as the government pulled out all the stops to offset the impact of months of lockdown, while tax take fell 3.5% to 1.5 trillion euros.  

The spending binge is set to continue, with German Finance Minister Olaf Scholz last month promised to do whatever was needed to allow Germany to spend its way out of a Covid-induced economic slump.

Read More: IMF projects budget deficit at 7.1pc in FY21 

However, the country is struggling hard to control a third wave of the Covid-19 pandemic and is not going to open or resume the activities of businesses, like bars and cinemas, closed until at least later this month. 

The number of people on shortened working hours has also declined in March, driven by the industrial sector, which is promoting from robust exports, said an Ifo institute. Companies can reduce workers’ hours under a government scheme intended to avoid mass layoffs during the downturn by offering companies grants to keep employees on the workforce. 

Ifo estimated that 2.7 million Employees were on shortened hours in March, down from 2.9 million. The number of people on the scheme peaked at about 6 million a year ago, but had been rising steadily since Germany entered its second lockdown late in 2020. 

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