The economic Tsunami that is triggered by the Shutdown, which brings an immediate contraction of private consumption. In addition, the production will be affected massively, because employees can come to work and precursors are not available. In return, the companies try to reduce their wage costs by applying for short-time working and lay off staff. This increases the contraction of the consumption, because the income of employees and self-employed go back.

debt of the company increases, your equity shrinks

The Tsunami will hit first on the manufacturing and service sectors. Because the company must continue to make fixed payments for wages, Rent, Lease, Leasing, interest and principal, you may suffer losses. This pushes the debt up, equity shrinks.

Vita Peter Bofinger University of Wuerzburg, Peter Bofinger

The Economist has held since August 1992, a chair of Economics, money and international economic relations n the University of Würzburg.

From 2004 to 2019 Bofinger advised as one of the “economic wise men” of the Federal government.

Bofinger is the author of numerous books, including principles of Economics. An introduction to the science of markets.

a New scheme for short-time work wage payments massif

In the ideal case, to relieve the state, to stop the shaft at this point. Very effective in the short-time working money, the company is relieved when the wage payments definitely is. With the now adopted Liquidity support, it becomes easier for the enterprises to obtain loans to continue their fixed-payment obligations. Since the debt of the firm increases, however, is not broken the wave. For companies that have already lost their entire equity to come out of such measures already too late.

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Also, the real estate sector and banking industry

threatened If companies, but also private households, are not able to, your fixed payment obligations, reaches the wave first, the real estate sector, especially the owners of commercial real estate. These are then, as some of the “home builders” for their part, are no longer able to service their outstanding loans sufficient.

And so the wave hits the banking system, and at the same time also with non – performing loans from the service and production sector. There is a danger that the Corona-crisis triggers a second great financial crisis, for example.

the state still needs more help

applying This scenario is purely hypothetical in nature. However, it does highlight how important it is to the wave as early as possible, so the service and production company, intercept. This requires more than just Liquidity support, which enable ongoing payments, but the massive damage to the company balance sheets change. Are in need of direct government Transfers, in particular in the Form of the reimbursement of the already paid taxes. Just as a rising level of debt in this sector can be prevented with dangerous knock-on effects for other sectors of the economy. Important grants for Solo self-employed and very small businesses and the equity assistance that has been decided by the Federal government for larger firms in this respect. So far, there is a lack of appropriate support for small and medium-sized companies with eleven to 250 employees.

private households are income and asset losses –

require A Bazooka, which is stabilized by direct transfer, the balance sheets of the company, is additional state funding. The state, however, would be required to be financially much more, when the Tsunami unrestrained would be one sector after another flood.

But even if it manages to break up the wave early, what the German state is quite possible, is likely to be the restart is not easy. It will not be possible to avoid that households significant income and assets suffer losses, and that the equity position of the company deteriorated. In addition, the position of the German economy was already in the past year, anything other than rosy. Especially in the automotive sector suffered significant declines in Production.

When you reboot, distressed industries, tax relief

A dynamic restart, is to be without government assistance is hardly possible. Helpful measures to help the sectors affected by the Shutdown, so in particular, the gastronomy and the stationary retail market would be first. Here is a temporary reduction in the VAT would be thinking. To strengthen the buying pleasure of the private households can also make a 2020 retrospective reduction in the solidarity surcharge, as is planned for 2021. That would be more targeted and to accomplish administratively simple as the much-quoted helicopter money.

the state must immediately allow for depreciation and the investment allowance to invest

This will make it easier for the weakened company, again, one should allow companies that make profits, an Immediate write-off of 100 per cent. For companies in the area of Loss, one might think of a government Investment grant in the amount of 20 percent that must be paid in the course of ten years back. With interest rates below Zero, these measures for the Treasury would be a “free lunch”. You would get companies that struggle after the Shutdown, any additional credit to, a welcome liquidity to offer help. You could make the allowance conditional on the fact that investments are made that serve the ecological Transformation. For this purpose, a stronger promotion of the acquisition of electric cars and Plug-in hybrid mobile would be helpful.

Coverage of over-Indebtedness must be

be prevented For the prospects of the German economy after the Shutdown, two factors are crucial: firstly, it is important to limit the damage to the area of production and service companies as possible and to avoid a Skip on the real estate and the financial sector. This requires that in addition to the Bazooka, the Liquidity support, a Bazooka with extensive direct government Transfers in the Form of negative taxes will be charged. Only in this way an area of the deck can be avoided at the end of over-Indebtedness. In addition, there is a need in the Phase after the Shutdown of a strong government Stimulus, mainly through tax relief, so that we come as quickly as possible in a normal situation of our economy.

the most Expensive solution is a collapse of the entire economy

would require All of the considerable state resources. But it would be naive to believe that there is an Alternative. The most expensive solution to a systemic collapse of the entire economy during the Shutdown Phase and a subsequent long phase of weakness with high unemployment and anemic investment. Then the crisis would have us not only temporarily but also in the long term, our prosperity. Everything about the development of the Corona-crisis

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