DIW fears bankruptcy tsunami: pandemic costs Germany 391 billion euros

Sunday December 27, 2020

DIW fears bankruptcy tsunami
Pandemic costs Germany 391 billion euros

The German economy has already lost more than 200 billion euros as a result of the corona pandemic. The German Institute for Economic Research (DIW) has calculated that it will be almost twice as much by March. If the lockdown is not lifted, the consequences are catastrophic and last for years.

The German economy has so far lost more than 212 billion euros as a result of the corona pandemic. At the end of the crisis it will be 391 billion euros, as the German Institute for Economic Research (DIW) has calculated for "Welt am Sonntag". The DIW assumed that the number of infections would fall again in spring.

The economists compared the actual and forecast growth with the so-called potential growth for the years 2020 to 2022. This expresses how strong the economy would have grown without the pandemic.

"If we don't manage to significantly reduce the number of infections by March, it would be a disaster," said DIW President Marcel Fratzscher of the newspaper. It would then take years for Europe and especially Germany, which is heavily dependent on exports to the euro zone, to recover. Then a bankruptcy tsunami threatened, it was said. It would be difficult for the unemployed to find a new job.

Agreement on record crash

Before there is a possible recovery, economic research institutes expect a record crash this year. Due to the Corona crisis, the Ifo Institute is expecting a historic slump of 5.1 percent in the year to come. "Because of the recent shutdown here and in other countries, the recovery is shifting backwards," said Ifo economic chief Timo Wollmershäuser recently. "The production of goods and services will not reach their pre-crisis level until the end of 2021."

The economy should take off from spring, when corona vaccinations and milder weather are likely to contain the pandemic again and the lockdown should be ended. Consumers, for example, should contribute to this, as Wollmershäuser estimates that they should have saved around 100 billion euros due to unusual trips or the forced waiver of restaurant visits. At least part of this "backed-up purchasing power" could flow into consumption in 2021 and support the recovery.

Economists agree that winter will be tough for the economy. Because of the partial lockdown that has been in place since November and the tightening of infection protection measures that will apply until at least January 10, it is likely to shrink again. The Essen institute RWI expects a decrease of 1.7 percent in the current fourth quarter alone.