(Bloomberg) -- Germany is likely to extend a state wage-support program designed to help Europe’s biggest economy weather the coronavirus crisis, according to a senior lawmaker.
Officials from Chancellor Angela Merkel’s coalition -- meeting later on Tuesday in Berlin -- have “always taken the sensible path in the end on labor-market and social policy,” Carsten Schneider, a caucus manager for the Social Democratic Party, said in an interview with Deutschlandfunk radio.
“That’s why I think it will be agreed this evening and then sent to the lower house of parliament for approval,” Schneider said. The SPD is the junior coalition partner with Merkel’s conservative CDU/CSU bloc.
Finance Minister Olaf Scholz last week proposed extending the job-preserving subsidies to 24 months, saying the measure would cost the government an extra 10 billion euros ($11.8 billion). Labor Minister Hubertus Heil, like Scholz a Social Democrat, said Friday that his impression is that both Merkel and the CDU’s Bavarian sister party, the CSU, back the plan.
The compensation program, normally limited to 12 months, was relaunched to shield workers and companies from massive job cuts during the pandemic. The benefit initially covers as much as 67% of net wages for households with children and increases over time.
Data published Tuesday confirmed that the German economy suffered a severe blow in the second quarter. Investment collapsed by 7.9% and household spending slid 10.9%, resulting in a 9.7% drop in total output. Exports registered a decline of more than 20%.
The number of short-time workers is several times higher than during the 2008-2009 recession caused by the global financial crisis, though Ifo institute economists estimate the number fell to 5.6 million in July from about 7 million in May.
“It’s still not certain how long this crisis will last, and the issue is whether we can protect jobs beyond the crisis, particularly in the manufacturing sector,” Schneider said. “Maintaining employment is a key factor in getting back to growth in the future. We can afford it, and I expect not only the unions to support it but employers as well.”
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