(Bloomberg) -- Germany is considering sweeping measures to support the economy and help companies deal with the impact of the coronavirus as the nation braces for a possible lockdown as soon as Monday.
Chancellor Angela Merkel’s ruling coalition will create a fund worth 500 billion euros ($538 billion) to provide firms with loan guarantees and injections of cash, Der Spiegel magazine reported. Finance Minister Olaf Scholz earlier threw his weight behind the government buying stakes in companies struggling to avoid bankruptcy.
The government is already considering declaring a state of emergency to permit unlimited public borrowing, while a senior minister warned Friday that if people continue to socialize Germans may join many of their fellow Europeans in being confined to their homes.
“We will monitor the behavior of citizens this weekend and Saturday is a decisive day,” Chancellery Minister Helge Braun told Der Spiegel. A curfew would be an “enormous additional burden” and the government wants to avoid it but may have no choice if people continue to gather in groups, he added.
Merkel will consult regional leaders Sunday to discuss the latest efforts to contain the virus and a cabinet meeting is planned for Monday at which any further restrictions would be approved. Germany has more than 15,000 confirmed cases and 44 deaths.
As well as trying to limit the spread of the disease, Merkel’s government has pledged to lend as much as 550 billion euros ($594 billion) via state-owned development bank KfW to help struggling companies.
The government also wants to ask parliament for authorization for sweeping spending leeway, people with direct knowledge of the discussions said Thursday. The Cabinet is set to sign off on the request in the coming days.
The historic move would be necessary under German law, which caps outlays under normal circumstances via a constitutional mechanism, known as the debt brake, which only allows for excess spending in crisis situations.
Scholz said that, if necessary, the government could buy company stakes using a fund set up to deal with the financial crisis a decade ago.
Liquidity Shortage
“We used something similar in 2008 to 2009, although that was focused on the banking sector,” Scholz told Deutschlandfunk radio Friday.
“It could very well be that a company suddenly has a shortage of liquidity, and we are trying to address that with our liquidity program,” he added. “But at some point share capital will be required and we’re ready again to use the financial markets stability fund to make our contribution.”
As the economic fallout widens, companies in sectors like transport, retail and tourism are reeling and some of Germany’s corporate titans -- from Volkswagen (DE:VOWG_p) AG to Daimler AG (DE:DAIGn) -- have taken unprecedented steps to idle plants.
BMW AG this week abandoned hopes for another record year in sales, predicting deliveries will be “significantly below” 2019 levels and profitability the weakest in years.
The government could purchase a stake in Deutsche Lufthansa AG (DE:LHAG) -- which said Thursday it will stop 95% of flights -- as part of a rescue, a person familiar with the plan said last week.