Can Germany spend its way out of the corona crisis?

Coronavirus is grim news for all major economies and Germany is no exception. The country’s economic output decreased by 2.2 per cent during the first quarter of the year, the sharpest fall since the 2008 crash and the second biggest since German reunification in 1990. A double-digit dip in the second quarter, when the full impact of the lockdown restrictions introduced in March become more visible, seems likely. But while Germany is not alone in facing up to grim economic statistics, it is using its economic clout – unavailable to poorer countries in Europe – to try and spend its way out of the crisis.

Many German employers have been able to switch staff to shorter working hours during the outbreak, avoiding mass layoffs, under the terms of a government rescue package. The crisis is already tearing a huge hole in the public finances, but Angela Merkel is preparing another economic shot to help companies recover from the pandemic.