The new Coronavirus not only kills people, but has also infected the global economy. Global supply chains are faltering, stock market prices are collapsing worldwide, and the negative consequences for the global economy have so far been at best foreseeable. A worldwide recession is hardly to be averted. These signals should set off alarm bells, especially in the country, which has focused its economic strategy on the Export of goods like hardly any other country. But the federal government has clearly not recognized the seriousness of the situation, remains stubborn in its line of fiscal consolidation and thus once again shows itself incapable of adapting its ideological blinkers to reality.
When China coughs, the global economy becomes ailing. And China’s cough is huge. Meanwhile, it even seems possible that the Chinese economy shrinks in one quarter for the first time since the Cultural Revolution in 1976. The production figures have already undercut the negative records set in the wake of the 2008/2009 financial crisis, and individual reports such as the 80% decline in car sales figures suggest how dramatic the Situation is. China has pulled the emergency brake and managed to contain the spread of SARS-CoV-2. The world’s second largest economy is now at a standstill. What distortions there will still be and when the economy will start again is open.
This “economic downturn” in China alone would probably already have the potential to weaken the export-oriented German economy, which has been struggling with declining order intake for more than a year. However, the Covid-19 pandemic has long been more than a local Chinese phenomenon, and what we are seeing so far is only the beginning of a development that will have very massive consequences for the global economy. The industry’s highly sensitive global manufacturing, development and trading system is now facing plant closures, blockades and interrupted trade routes. Globalization is coming to an end.
Global crises are not new, but this time, for once, it is not demand that breaks down, but supply. Profound consequences for particularly exposed sectors of the economy, such as Transport or tourism, are difficult to predict, but they will come. And the consequences of the pandemic on the financial markets and the banks ' increasingly strained balance sheets are also yet to be seriously answered. However, it looks like the perfect storm is brewing out there at the moment and it would be up to politicians if possible to take the necessary measures now so that the storm does as little damage as possible. Unfortunately, this cannot be said.
Instead, the federal government once again reacts with a despondent mixture of sensible, but in isolation completely inadequate individual measures such as the expansion of short-time work and the offer of guarantees and KfW loans. In a second stage, tax deferrals for affected companies are to be added. Only one thing is sought in vain: a recovery plan. Now would be the right time to launch large-scale investments that would enable the economy as a whole to cushion the coming economic losses and, ideally, even absorb them. The money is there and the investment jam of the last decades offers, starting with the infrastructure over the digitalization, the energy transition, the education up to the health system, countless fields in which one could start investment programs. This could be implemented at state or federal level and ideally even at EU level. It would only be important that the money is mobilised quickly and in sufficient quantities to trigger an economic effect in a really timely manner. But there can be no question of that either.
Instead, they practice deep-stacking and putting forward inadequate and less meaningful proposals. Federal finance minister Scholz, for example, dreams of bringing forward the abolition of the solidarity surcharge, while the Union is flirting with tax cuts and experts such as Marcel Fratzscher are bringing a temporary reduction in VAT into play. However, all three ideas are unsuitable, since they are essentially aimed at stimulating demand, which is not (yet) the Problem at all. Symbolically, it would now be time to reefer the sails, close the bulkheads, prepare the leak pumps and make the ship storm-proof. With which bucket we draw the water from the bilges in case of failure of the measures, we can discuss later.
What has already begun in health policy is now continuing in economic policy. Instead of boldly and resolutely taking responsibility, politicians are leaning back and prefer to avoid the necessary decisions. But the crisis does not disappear when Politics Closes Its Eyes. On The Contrary.