Germany climbing out of economic slump: Central bank

BERLIN: Germany has turned the corner on the worst of an economic crisis sparked by the coronavirus pandemic and is now on the path to recovery, the central bank chief of Europe’s biggest economy said.

“We experienced in the last months the deepest economic slump in Germany’s (post-war) history,” Jens Weidmann told Sunday’s edition of the daily Frankfurter Allgemeine Zeitung.

“The good news is: The trough should be behind us by now, and things are looking up again. But the deep slump is being followed only by a comparatively gradual recovery.”

Weidmann, who has never minced his words against expansionary policies ramped through in the past by the European Central Bank, on Sunday also voiced support for the unprecedented economic rescue and stimulus packages unleashed by Berlin to shield German companies and jobs.

Chancellor Angela Merkel’s government had stunned observers in March when it unveiled a rescue package worth €1.1 trillion, smashing through a long-held no new debt dogma to fund the measures.

Earlier this month, it said it would plow another 130 billion euros into various schemes, including a cut in VAT, to stimulate the economy.

Reacting to comments that Germany, once known as a “frugal” nation, was now dramatically loosening its purse strings, Weidmann said: “The image of the Swabish housewife is often wrongly portrayed.

“She is not saving for the sake of saving, but so that there is money that can be spent sensibly and in case there are difficult times. And that is precisely the case here.”

Like nations across Europe, Germany shut schools, shops and sent workers home from mid-March to halt transmission of the coronavirus.

The impact of the health crisis has pushed the economy into a deep recession believed to be the worst since the Second World War.

After the rate of new infections dropped sharply, Europe’s biggest economy began easing restrictions in early May although social distancing rules are still in place and huge events banned.

Nevertheless, the improved health situation and the huge government support have helped lift sentiment, with a closely watched survey showing confidence among investors surging to its highest level since before the financial crisis.

Spain, meanwhile, reopened its borders to European tourists in a bid to kick-start its economy while Brazil and South Africa struggled with rising coronavirus infections. 

Spain on Sunday ended a national state of emergency after three months of lockdown, allowing its 47 million residents to freely travel around the country for the first time since March 14. 

Spain also dropped a 14-day quarantine for visitors from Britain and countries in Europe’s visa-free Schengen travel zone to boost its vital tourism sector. But there was only a trickle of travelers at Madrid’s airport, which on a normal June day would be bustling.

“This freedom that we now have, not having to justify our journey to see our family and friends, this was something that we were really looking forward to,” 23-year-old Pedro Delgado said on arrival from Spain’s Canary Islands.

Virus cases were rising, however, in Brazil, South Africa, the US and other countries, especially in Latin America.

In Europe, one meatpacking plant in northwest Germany alone has 1,029 cases, so the regional government issued a quarantine for all 6,500 workers, managers and family members at the Toennies meat processing facility in Rheda-Wiedenbrueck.

British Prime Minister Boris Johnson’s government will announce next week whether Britain will ease social distancing rules for people to remain 2 meters apart. 

Business groups are lobbying for that to be cut to 1 meter to make it easier to reopen pubs, restaurants and schools, but that could also lead to more infections.

Britain has Europe’s highest virus death toll — and the world’s third-highest — at more than 42,500 dead.