Government deficit due to corona crisis: minus can be this small

The budget gap is smaller than feared. This is a success of the Groko’s Corona policy: It did not save money, but supported victims of the crisis.

Chancellor Merkel and Finance Minister Scholz got a few things right during the crisis Photo: John Macdougall/afp/dpa

They are astonishing figures: In the first half of the year, the deficit of the German state amounted to 51.6 billion euros, as reported by the Federal Statistical Office on Tuesday. This corresponds to 3.2 percent of economic output. So the Corona crisis has torn a deep hole – and yet this is an enormous success. For it was not expected that the minus would remain so small, after all, the economy was in lockdown for weeks. The latest data show that the federal government has done everything right economically.

The bottom line: The government in Berlin did not cut spending. Instead, there were rescue programs and economic stimulus packages. Every victim of the crisis was supported, whether through short-time working allowances, grants or aid loans. This spending has paid off. The economy has not stumbled into the abyss, but has stabilized. Ultimately, therefore, the aid measures are self-financing.

This realization is not entirely new. In the financial crisis starting in 2008, the German government relied on the same recipe – also with resounding success. Nevertheless, there was one major difference then from today: Germany was only interested in itself. It went without saying that the German economy was massively supported by government loans. But other euro countries, such as Greece, Portugal or Italy, were expected to make ironclad savings. So the euro crisis did not end again at all.

This time, however, German politicians are ready to apply their recipe for success to the entire EU: A 750 billion euro loan program is currently being negotiated in Brussels. This pleasing turn of events, however, has not only to do with higher wisdom, but also with the power of the factual.

The Germans are left with Europe as a guaranteed safe market. Great Britain is currently mired in Brexit; China and the USA are entangled in a trade dispute. Suddenly, our neighbors seem attractive again. Fortunately.

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