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Don't shut down the economy!

Boehme Henrik Kommentarbild App
Henrik Böhme
January 15, 2021

More and more public figures in Germany have been calling for a much stricter lockdown and want more people to work from home and temporary factory shutdowns. DW's Henrik Böhme says it will end in disaster.

A closed store in Bonn
The economy is dealt a heavy blow when stores and factories have to closeImage: picture-alliance/NurPhoto/Y. Tang

Earlier this week, Germany's Federal Statistics Office (Destatis) announced that the German economy contracted by 5% last year when the coronavirus pandemic took its course.

That's less than the 5.7% drop logged back in 2009 at the height of the global financial crisis and in fact much less than the economic prophets predicted in spring in face of the first lockdown in the country.

One could say the country got off lightly, all the more so since the number of people who've lost their jobs during the crisis has so far been rather limited.

Of course, everyone is now hoping for a rebound in the course of the current year. The German finance minister has repeated time and again the government will be able to keep paying aid money for pandemic-hit companies for a long time, but there's been an administrative backlog in payouts, meaning that many are still waiting for money which was due for November and December.

And what does the minister mean when he says "for a long time"? His resources are limited, too.

Anyone listening at all?

It's true that right now borrowing money doesn't cost you a lot — if anything at all — in terms of interest payments. Nonetheless, the government will need to ask itself who's going to foot the bill for all this generous financial assistance, and above all, how much debt burden we are leaving for the generations to come.

The state is only able to pony up so much money right now because the economy witnessed steady growth for years before the crisis and tax income burgeoned due to a robust labor market and high employment, which also boosted private consumption.

So, whoever is now calling for a complete standstill in factories and even more people working from home must have lost touch with what most people want and jeopardizes any economic recovery. There are in fact reports that some companies have been holding crisis meetings to address concerns of employees fed up with remote work.

DW business editor Henrik Böhme
DW's business editor Henrik Böhme

All those adults who don't have a huge home and spend the day with children in homeschooling and have to contend with the frequent collapsing of digital learning platforms will hardly be in a position to stay focused on their jobs.

Digitalization — just a buzzword?

On the other side, there are many executives who don't trust their employees and won't let them work from home or are afraid of potential demands from their employees to better equip remote workplaces. All in all, the situation remains tricky.

Policymakers shouldn't be too surprised at the shortcomings at hand. For too long, digitalization has been just a buzzword and has not yet reached many people in their daily lives. Just take the German initiative to provide broadband connectivity for schools across the nation. That sounds like a good plan, and €5 billion ($6.1 billion) have been allocated by the government to achieve this.

The thing is only that schools have very different ideas of how they want to be hooked up to the web, which doesn't make it easier or faster to implement broadband connectivity.

But coming back to calls to halt production in factories — this cannot be the right thing to do, considering the current uptick in orders particularly from Asia and the threat of losing crucial customers.

Policymakers here appear helpless as they struggle to come up with an efficient strategy to fight the pandemic. They had the opportunity in summer to develop such a strategy, but they missed it as the wrangling over who's responsible for what continued between the federal government and top representatives from Germany's 16 states.

Maybe the current restrictions will have to continue until the Easter holidays as we wait for a slot to get vaccinated. But forcing people into working from home and halting production on factory floors are no reasonable measures as it would add economic disaster to a crisis that we can get on top of with the help of an efficient vaccination campaign and yet-to-be-approved medication.

Total shutdown for Germany?

Boehme Henrik Kommentarbild App
Henrik Böhme Business editor focusing on international trade, cars, and finance@Henrik58