Senior members of Germany’s ruling coalition government will meet in Berlin today to discuss measures to combat the economic effect of the coronavirus outbreak. Germany currently has 240 cases but no deaths.
Already experiencing anaemic growth of 0.6% last year, Berlin expects that with the virus in full swing, domestic demand will weaken further and the manufacturing sector—heavily reliant on Chinese demand and supply chains for exports—to tank further. This could put Europe’s largest economy into recession.
Expect today’s meeting to highlight the lack of consensus on whether to launch a stimulus now or later. The senior coalition party, the centre-right Christian Democrats (CDU), is split on the issue—Bavarian conservatives support stimulus now while the rump CDU would prefer to assess further metrics.
The junior coalition partner, the centre-left Social Democrats (SPD), also wants stimulus now. SPD Finance Minister Olaf Scholz, armed with $18.9 billion leeway in the budget, has proposed $13.5 billion in infrastructure spending to pump money into the economy and generate demand. CDU Economy Minister Pieter Altmaier is keen on tax breaks and assistance to small and mid-sized businesses—the backbone of the economy.
The final package will likely be a combination of all of the above. However, as recession fears grow, government disagreement will likely delay any stimulus given the overriding fiscal conservatism of Chancellor Angela Merkel’s debt-averse, spend-thrift government.
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John is a Senior Analyst with an interest in Indo-Pacific geopolitics. Master of International Relations (Australian National University) graduate with study focus on the Indo-Pacific. Qualified lawyer (University of Auckland, NZ) with experience in post-colonial Pacific & NZ legal systems.