It was probably just a coincidence, but it fitted pretty well: First on Wednesday of this week, the leading research institutes presented their big autumn analysis of the economic situation in Germany. In so doing, they set the framework for what was to follow soon: Exactly twelve hours later, the Chancellor and Prime Minister appeared in front of the cameras to explain how they want to contain the corona virus again with tightened measures. In a first step, as they explained, further cuts are quite likely.
Two appearances within a few hours that show what is at stake these days. Economic recovery and the containment of a pandemic that had recently lost much of its horror.
First the numbers from economists: They expect our economy to shrink by a little more than five percent this year. On the one hand, the minus is a good percentage point larger than assumed in the last forecast in April, but nevertheless significantly smaller than the gloomy predictions of some experts who had warned of a slump of eight or ten percent in May and June. Therefore, the prognosis was not as dramatic as it was interpreted by some.
GDP increase next year
For the next year, the institutes expect a strong increase of almost five percent (plus 4.8 percent), but it will take a long time before Germany’s companies will have completely overcome the slump this spring. We had managed the easy part of the recovery, said Stefan Kooths, the economic director of the Kiel Institute for the World Economy at the presentation of the autumn forecast, but the rest was “the more arduous route back to normal”.
What the economic researchers did not say so clearly in their press conference became clear in their analysis: Corona did not plunge the whole country into a deep economic crisis. Some regions and industries do not – and others all the more violently. The virus not only undermines our prosperity, it also divides: While the construction industry grew by eleven percent in the first half of this year, the manufacturing sector (which includes large parts of the automotive and mechanical engineering industries) shrank by a full twelve percent. Although this sector is now benefiting from rising demand from abroad, other areas such as tourism and the hospitality industry will continue to suffer for a long time. The regional differences are also impressive: with an economic minus of one percent, Schleswig-Holstein was hit very differently by the pandemic in the first half of the year than, for example, the industrial state of Baden-Württemberg (minus 5.5 percent).
K instead of V
Over the past few months, economists have thrown a wide variety of letters at our heads to describe the expected economic trend: First it was an I (sharp crash), then an L (down, and then flat), later a U (down quickly , Stagnation, then up again), maybe also a W (down, a little up, down again and only then the real upswing), and above all there was the great hope of a V. But for a few weeks there has been a new letter in the debate that depicts this split in the upswing: the K. For large parts of industry, things may look up again. The entire aviation, travel and exhibition industries, however, have more bitter months and maybe even years ahead of them.
I also had to think of this K when later that evening the Chancellor and the Prime Minister explained with a serious expression how they now want to recapture the recent and steep increase in the number of infections. Less contacts, less travel, less partying. “We are actually much closer to the second lockdown than we want to admit,” said Bavaria’s Prime Minister Markus Söder. And even if this second lockdown would look different than the first (the shops are likely to remain open, schools and daycare centers too), the consequences would be devastating – especially in industries that are still far from any recovery.
It would have been all the more important that the federal and state governments agreed on a common position on the messed up accommodation ban. Screwed up because every country thinks differently, there is no clear connection between infections and domestic German tourists, and because it is now administrative judges who are now overturning the bans for precisely that reason. It would have been better if the heads of government had come to this conclusion themselves, had admitted a mistake and corrected it.
Because that will be the decisive factor in the coming weeks and months: Not only to cushion the economic divide caused by the pandemic, but also the political one that arises when individual measures to contain the virus are one-sided and no longer comprehensible. In an interview this week, Marcel Fratzscher, head of the German Institute for Economic Research in Berlin, said: “We don’t know what the next year will bring for us. And we have to be prepared for the fact that things can get worse again. ”With this warning Fratzscher is right, and it also applies to heads of government: only if the vast majority of the population has made the cuts and interventions in their lives, theirs Freedom and its economic well-being will continue to be accepted, the virus can really be contained.