“The corona situation is still serious. That is why our entrepreneurs still need our support,” said a spokeswoman for the Federal Ministry of Economics today. So that the difficult situation does not lead to an incalculable number of companies slipping into bankruptcy due to corona, the federal government has a new aid instrument on offer from today: the equity grant. A few days ago, Federal Minister of Economics Peter Altmaier said: The Corona crisis continues to hit many companies and employees hard. Some branches of the economy have been closed for more than six months: “We are making an additional offer of help to these companies and their employees. With a new equity grant, we are directly strengthening the substance of these companies and helping them through this difficult time.”

Who is eligible?

Starting today, companies can apply for the new grant with their initial application for Bridging Aid III. The Ministry of Economic Affairs announced that companies with a drop in sales of at least 50 percent in at least three months in the period from November 2020 to June 2021 are eligible. Companies that have already submitted an initial application for bridging aid III can apply for the new equity grant with an amendment from the end of April. The grant is based on the amount that a company receives reimbursed for fixed costs from Bridging Aid III: These include rents and leases, interest expenses for loans, expenses for electricity and insurance. The grant is up to 40 percent of the amount that a company receives for the eligible fixed costs.

How else is help?

During the crisis, the federal government decided on comprehensive aid programs . The best-known instrument is likely to be the bridging aid. Bridging Aid III supports companies, self-employed persons and freelancers in all industries, it is “the central program of the federal government for companies with a significant corona-related decline in sales”. According to information from the Federal Ministry of Economics, around 3.1 billion euros had been paid out by April 13, which corresponds to 42 percent of the aid requested.

Extraordinary economic aid

The so-called extraordinary economic aid includes the November and December aid. The federal government is thus supporting companies, the self-employed and associations that will be affected by the closings from November 2, 2020 to combat the corona pandemic. Those affected receive a one-off subsidy of up to 75 percent of the respective sales in the corresponding months of the previous year for the duration of the closings in November or December. As far as the December aid is concerned, more than 5.1 billion euros have been paid out so far, that is 81 percent of the aid requested. In addition, there is the restart aid for the self-employed, other hardship aid as well as sureties and guarantees for larger companies, family businesses and medium-sized companies from the economic stabilization fund. In addition, KfW offers cheap loans for companies, self-employed and freelancers who have got into financial difficulties due to the Corona crisis.

Tax assistance is also granted

There are also tax aids and simplifications, which you can find out about on the website of the Federal Ministry of Finance. These include, among other things, the deferral of tax payments and easier adjustment of tax prepayments, extended deadlines for tax returns by members of the tax advisory professions. Finally, there are still improved options for depreciation for movable assets, tax-free subsidies from the employer for short-time work allowance, home office flat-rate and the permanent increase in the relief amount for single parents.

The mountain of debt is growing

The bulk of the offers of assistance cost the state budget dearly. According to a study by the employer-related Institute of the German Economy (IW), national debt is growing rapidly in the pandemic . The federal, state and local governments will pile up around 650 billion euros in new debt by 2022. The debt of the German state will grow to a total of 2.7 trillion euros by then, it is said. The economic experts propose not to reduce debt too quickly, so that the state has leeway for investments in infrastructure, for example, and not too many billions flow exclusively into debt reduction.

National debt is growing rapidly in the pandemic. According to calculations by the employer-related Institute of the German Economy (IW), the federal, state and local governments will pile up around 650 billion euros in new debt by 2022. According to a new IW study, the debt level of the German state will grow to a total of 2.7 trillion euros by then. “Depending on what happens in the coming weeks and months, this number can get even bigger,” said IW Director Michael Hüther at the presentation. At the same time, economists are asking themselves: What is the best strategy to reduce this debt again and not to restrict the state’s scope for necessary investments too much despite high repayment burdens?

According to IW, the debt ratio in Germany will already peak at 75 percent at the end of this year. This ratio describes the relationship between debt and gross domestic product. According to the criteria of the EU Maastricht Treaty, it should be a maximum of 60 percent. In 2019, Germany just kept to this mark. In the US, the debt ratio was over 108 percent.

“Greatest Challenge of the Post-War Era”

“The corona pandemic was and is the greatest economic and socio-political challenge of the post-war period,” said Hüther. Never since 1945 has the state spent so much money in such a short time on a goal as to combat the corona pandemic. The question now is how the costs can be managed. The IW states that the state would have to repay 24 billion euros annually if all of Germany’s corona debts were to be repaid within 20 years, as the federal government is planning. As a result, the federal government would have to save elsewhere, so that the public sector would generate surpluses. According to IW, it could not be reconciled otherwise with the debt brake.

Scope for investment

“The current repayment plan is very sporty, but inconsistent and leads to unnecessary macroeconomic problems,” said Hüther. The economic experts at the IW are therefore suggesting that debt reduction should be avoided too quickly and that the public sector should rather be given leeway for necessary investments in infrastructure, for example. “Instead of 20 years as planned by the federal government, the debt should be repaid in 40 years,” the study says. In addition, the experts recommend “a moderate opening of the debt brake” in order to increase the federal states’ room for maneuver – and the establishment of a special fund for investment purposes. The debt ratio could fall from 75 percent in 2021 to 61 percent in 2035.

IW against higher taxes

Tax increases, as they are proposed in part in the upcoming federal election campaign, on the other hand, would slow down economic growth and weaken Germany as a business location, according to the IW experts. Rather, economic dynamism must be promoted. From the point of view of the institute’s experts, reducing the debt ratio after the crisis should primarily take place through economic growth. For this, in turn, attractive framework conditions are an essential prerequisite, not least in terms of infrastructure and taxes.

Germany Fund for Investments?

In order to address the existing investment deficits in infrastructure, climate protection and education, a Germany fund could also be set up, which could invest 45 billion euros annually in climate protection, education and infrastructure for ten years. Countries get into debt by issuing government bonds. Institutional investors such as pension funds, asset managers, fund providers, hedge funds, companies and banks, but also private individuals act as creditors. In view of the mass of bonds issued and the billions of dollars that governments need, private investors hardly matter.