Corona crisis Further help for business in sight

Status: 06/18/2021 5:51 p.m.

The states are urging to continue Corona aid for companies until the end of the year – Federal Minister of Economics Altmaier indicated readiness. Support for domestic exporters has already been extended. There are signs of an extension of the corona aid for companies that have been particularly hard hit by the pandemic. The economics ministers of the federal states demanded that the funds previously planned until the end of September be continued until the end of the year. The federal government pays the previous “Bridging Aid III”.

Extension after the summer break if necessary

Federal Minister of Economics Peter Altmaier (CDU) made it clear after a meeting with his country ministerial colleagues that he is not averse to an extension. One will look at the situation and, if necessary, extend the help after the summer break. The corona aid only applies to companies that can demonstrate a sharp drop in sales and can trace them back to the pandemic. As the economy is currently picking up again and more business is being done again, the number of companies eligible to apply is falling.

Altmaier: So far, 105 billion euros have been transferred

So far, a total of 105 billion euros have been transferred to companies as corona aid, said Altmaier. Roughly half of these are loans and half are grants that do not have to be repaid. In addition, there is money from the federal states. According to Altmaier, the state support has paid off: “Together we managed to prevent a loss of substance in the German economy.”

Against the background of the lower number of infections and the lifting of restrictions, Altmaier said the economy was “coming to a new start faster than many feared”. Growth is picking up – this year it will be 3.5 to 4 percent and in 2022 it will be more than 4 percent. The economy will have reached pre-crisis levels by spring 2022 at the latest. “That means, we are hopefully out of the worst,” said the CDU politician. When the bridging aid, which ran until the end of June, was extended by three months as “bridging aid III plus”, he was in any case in favor of continuing it until the end of the year.

Aid to exporters continues

Meanwhile, the corona aid for domestic exporters has already been extended until the end of the year. They were decided in July 2020 and should actually end this month. “Even if the economic situation has improved significantly in the past few months, the corona pandemic continues to pose challenges for the export industry,” the Ministry of Economics justified the decision. “Some companies are only now feeling the stresses with a delay.”

“Security signal” to the economy

North Rhine-Westphalia’s Minister of Economic Affairs, Andreas Pinkwart, spoke out in favor of continuing to support sectors such as the trade fair industry. After all, they would “presumably not yet be able to work in the fourth quarter in the way they normally would at normal times”. In addition, the FDP politician considers the extension of the bridging aid to be a good precaution for possible rising incidences in autumn. Then you would “not have to put on a new program from the hip”, but would have already been prepared. Saarland’s Minister of Economic Affairs, Anke Rehlinger, considers the prospect of the extension of the aid to be “a protective signal” to the economy. “We have to take care of the industries that are still suffering from the pandemic.” She stressed that the time should be used to prepare for all eventualities in autumn and winter. Should one be forced to make restrictions again because of the pandemic, there could be “other, smarter measures” that would take into account aspects such as a high vaccination rate.

Situation in trade fair industry “catastrophic”

The corona pandemic hit large parts of the German economy hard. In the meantime, things are looking a little better again, also because restrictions have been relaxed and restaurants and cafes are open again, for example. However, the situation in some sectors such as the trade fair industry is still very tense.

Jörn Holtmeier, managing director of the trade fair association AUMA, described the situation in his branch as “catastrophic”. The first industry get-togethers would take place again in September, but the number of trade fairs until the end of the year was clear. There have been many rejections. “If a stand builder finally gets another order for his first trade fair in November or December, but then does not receive any more money from the state in October, this can extremely worsen the already tense financial situation of his company.” Then company bankruptcies are possible. It is mainly about stand builders, caterers and private trade fair organizers. Exhibition companies that belong to municipalities and the state are not entitled to federal corona aid.

Around 231,000 employees

Holtmeier is also in favor of extending the aid until the end of the year. This was just a safety net, he said. “Some companies will get orders again beforehand and make sales, they will not have to use the help.”

According to AUMA, Germany’s trade fair industry has around 231,000 employees. This not only includes organizers and stand builders, but also companies with a strong trade fair business – a hotel, for example, which does most of its business with trade fair visitors, is proportionately included in the number of employees. Since March 2020, according to the Ifo Institute, the crisis in the trade fair industry has led to economic damage of an estimated 40 billion euros: Dealers could no longer buy anything at the industry get-togethers, and there were no more visitors who would spend money on restaurant visits, hotel stays or taxi rides

background

Corona consequences for companies How much longer does the state have to help?

Status: 06/17/2021 10:18 a.m.

Today, the federal and state economics ministers are discussing how to proceed with corona aid for companies. Warnings against a permanent state economy are getting louder. But some industries are still deeply in crisis.

From Axel John, SWR

Tim Sandrock walks through the 3500 square meter hall of his event company. He points to huge loudspeakers, lighting systems or projectors that are piled up to the ceiling. “That would normally all be used outside in mid-June, at theater events, village festivals or music concerts”says Sandrock. “The camp could be swept through completely. We haven’t moved the technology for at least 15 months.”

He is one of the two managing directors of Flo-Service GmbH in Mainz. The company has 25 employees and six trainees. The company organizes up to 1500 events per year with a focus on the Rhine-Main area. “From the disco ball for the teenage party to the stage technology for a Sting concert, we cover everything”says Sandrock. Although the economy is taking off again across the country, Flo-Service still has few orders at major events due to the pandemic requirements. Most recently, among other things, the Oktoberfest was canceled. This sends a devastating signal to the industry.

Hope for further help

“We are broadly positioned and have thus been able to limit losses. The Federal Employment Agency helped us a lot through short-time work with around 31,000 euros per month. The bridging aids were also extremely important to us last year”says Sandrock. “However, our company has fixed costs of 150,000 euros every month.”

“I very much hope for further government aid” – Flo Service Managing Director Tim Sandrock. Image: Axel John, SWR

Flo-Service mainly draws on its operating reserves before Corona. In addition, there was a tough austerity course. Overall, sales have decreased by a good third. This means that Sandrock is still in a brilliant position in the industry. Other companies make a minus of 90 percent or are no longer there. “In the long run, of course, you can’t finance a company like ours. I therefore very much hope for further state aid”, he says. Cultural events have a pre-planning of three to nine months. In the uncertain Corona time, that’s half an eternity. “I am optimistic that the worst is behind us. But we still need support for a transition period. Otherwise all previous payments would be pointless”, says Sandrock.

Economics ministers discuss further aid

The federal and state economics ministers meet today in Düsseldorf – for the first time in attendance. One question is: what will happen next with the support for the economy? The bridging allowance and short-time work allowance were only recently extended to the end of September and even expanded. Now it is about a renewed extension until the end of the year.

The host of the meeting, the North Rhine-Westphalian Minister of Economic Affairs Andreas Pinkwart from the FDP, has already made a decision: “I am in favor of the aid being extended beyond the end of September until the end of the year”, he says. “Sectors such as the trade fair and event industry or the showmen will continue to suffer from a drop in sales in the fall. The Federal Ministry of Economics also sees it that way. I would also like to advocate this course at the federal government.”

NRW Minister of Economic Affairs Pinkwart is campaigning for a further extension of the corona aid. Image: dpa

North Rhine-Westphalia’s Minister of Economic Affairs also refers to legal constraints. “Unfortunately, to fight the pandemic, we had to restrict the freedom of trade. That is why the bridging aid is not subsidy, but compensation. Parts of the economy are only now gradually returning to normal”says Pinkwart. Now it is a matter of creating transitions for the companies concerned.

Share of businesses in need is falling

More and more companies seem to manage this transition. According to a study by the Institute for Employment Research (IAB), only eight percent of all companies saw their existence threatened by May. In April this value was still 13 percent. “The incidence values ​​are easing in many places, and at the same time private-sector companies in Germany are looking more optimistically into the future, “says IAB Director Bernd Fitzenberger. So far, the Federal Ministry of Economics has approved a total of more than 105 billion euros for the economy during the crisis. In addition, there is short-time work allowance of around 32.3 billion euros.

Criticism from economists

More and more economists are critical of the ongoing political assistance. Lars Feld is one of them. The 54-year-old economist is a proven regulatory politician, i.e. oriented towards the principles of market and competition. “The extension until the end of September is fine. But I do not believe in a renewed extension”, he says. “The upswing is in full swing. According to the Bundesbank, we will have growth of 3.7 percent in Germany this year. Next year it should be five percent. The need for an expansive fiscal policy that continues to be so strong is therefore decreasing.”

In addition, there are always deadweight effects at companies that find themselves in a difficult situation without this having anything to do with Corona. However, Feld limits his analysis with a view to the event industry. “If the state restricts certain companies in certain sectors of the constitutionally granted freedom of trade, then this must be compensated. But we will have to live with Corona in the long term. Therefore, I think it is questionable whether the events industry can continue as it did before the pandemic.”

Digital structural change also in the event area

Tim Sandrock in Mainz knows that too. In order to survive economically, Flo-Service had already digitized itself during the lockdown. “We have brought our analog offers into the digital space. Instead of a meeting with a projector, screen or interpreting service, we now also offer complete software solutions”says Sandrock. Corona has massively accelerated development. “There will be a growing digital share at events of all kinds in the future.”

In order not to complicate this structural change, Sandrock is also in favor of a foreseeable phase out of the aid. For the next few months, however, the company needs government aid again. If politicians decide in favor of renewed extension, Sandrock will submit an application. “But I am sure that the industry will recover quickly after Corona. I’m also counting on a catch-up effect. Man is a sociable being. That’s why we’ll be back.”

Business support Only a few corona aid accessed

Status: 06/17/2021 10:08 a.m.

The federal government had made available 150 billion euros for companies as corona aid in grant programs – according to the Ifo Institute, just 24 percent of this was accessed. Companies in Germany have so far called on much less Corona aid than planned by the federal government. “Only a fraction of the budgeted aid was paid out to the companies affected by the corona pandemic,” said Selina Schulze-Spüntrup, researcher at the Ifo Institute. “That also has to do with the fact that some of the eligibility requirements were formulated quite strictly to rule out abuse.” According to the information, the federal government provided 150 billion euros in grant programs. Of this, 24 percent have so far been accessed. For emergency aid from the federal government, 50 billion euros were estimated, according to Ifo, less than a third of it was used.

Bridging aids were also not exhausted

In the case of the subsequent bridging aid, too, the money paid out was well below the budgeted amount: According to economic researchers, it was 6 percent for bridging aid I, around 10 percent for bridging aid II, and a good 28 percent for bridging aid III.

56 percent of the available funds were paid out of the November aid, 33 percent of the December aid. The state-owned KfW Bank has so far pledged 46 billion euros from its special program.