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Another shutdown: large small businesses are threatened with dying

2020-10-28T14:57:21.901Z


Large companies would still be able to cope with a new shutdown to some extent. But it would have fatal consequences for small companies and restaurants in particular.


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Tables folded up in front of an inn

Photo: 

Uwe Anspach / dpa

The German economy must tremble again.

Small businesses in particular with lively contact with customers - dealers, restaurant owners, operators of fitness studios - are waiting with great concern for the results of the Corona summit.

Because they will be the first to be affected by the measures decided by Chancellor Angela Merkel and the Prime Ministers.

Merkel is proposing drastic restrictions to the countries for the entire coming month to contain the corona pandemic.

From November 4th, restaurants and all leisure and sports facilities are to close.

Massive contact restrictions are also planned. 

The second round in the fight against the virus could have more serious economic consequences than the first.

Because the catching-up process in the summer months was nowhere near enough to compensate for the financial damage of spring.

Many small business owners have practically used up their reserves, others are already so deep in the red that bankruptcy would actually be inevitable.

So far, the government has been able to avoid a wave of bankruptcies by easing bankruptcy law.

But it is only a matter of time before the dam breaks.

According to reports, the Federal Finance Minister Olaf Scholz (SPD) wants to avoid precisely that - and compensate the affected companies for up to 75 percent of their sales losses during a shutdown.

The President of the German Hotel and Restaurant Association, Guido Zöllick, made it clear on Tuesday how serious the situation is: "A third of the 245,000 establishments are threatened with extinction if they close again," he said.

No on and off switch

The chief economist, Jörg Krämer, is also critical of the situation.

"The economy is not a machine that you can turn on and off at will," he says.

The immediate effects of a new shutdown would be manageable: "We have calculated what it would mean if the federal government's plan for November were implemented one-to-one. According to our calculations, gross domestic product would then shrink by one percent in the fourth quarter," he says.

"Since we have previously assumed growth of one percent for this period, we would be in the black."

This comparatively harmless forecast for the economy as a whole has a cynical reason: Larger industrial companies, service providers and financial companies would be comparatively little affected.

"The plans would primarily affect companies that are already severely weakened after the first lockdown and are therefore no longer contributing much to economic growth," says Krämer.

But the psychological consequences of another business closure are likely to be much more serious, says Krämer.

"When entrepreneurs experience that they are simply closed for the second time, that shakes trust in the economic system enormously - and that will leave a lasting impression and thus also have long-term economic consequences. Who, for example, opens a restaurant when they have to fear to be shut down again in the next pandemic. "

Of course you have to react to the increasing number of infections, adds Krämer: "Otherwise we will have overcrowded intensive care units in the foreseeable future and more and more people will die painfully."

But the current plans of the federal government are too generalized for the industries concerned.

"It's very similar to the first lockdown. I would like a more nuanced approach."

The last hope of many economists is that the renewed shutdown will not take as long as the first.

The Christmas business, which is so important for many retailers, could then shift from November to December and partly to online trading, says Holger Schmieding, chief economist at Berenberg Bank.

"The export demand from China and the USA is also currently good," explains the expert.

"That offsets some of the possible losses in Europe."

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Source: spiegel

All business articles on 2020-10-28

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