German Economists Praise the Scale of Aid to the Economy
German economists have praised the scale of the aid provided to the economy during the coronavirus crisis: 60 percent consider it appropriate to increase government spending by EUR 353 billion and issue additional guarantees worth EUR 820 billion. This is the result of the Economists Panel, a survey by the ifo Institute and Frankfurter Allgemeine Zeitung of around 120 economics professors at German universities which was conducted ahead of the new package. “This general praise goes hand in hand with criticism of the details of certain measures under discussion, such as the scrappage scheme,” says Niklas Potrafke from the ifo Center for Public Finance and Political Economy.
Only about 18 percent of the respondents rated the aid as too generous, and 4 percent as not enough. This matches up with the fact that 62 percent of those surveyed consider the risks to the sustainability of German public finances to be “low” or “very low” and only 37 percent to be “high” or “very high.” The expenditure should be financed through a combination of higher tax revenue plus lower government spending, say 35 percent of the economists. Meanwhile, 29 percent say there should be no specific financing for it, while 20 percent want to see only a reduction in government spending.
When it comes to helping other European countries, 50 percent of economists advocate a mix of loans and grants, 25 percent propose only non-repayable grants, 9 percent suggest only loans, and 8 percent believe no help should be offered.
However, 38 percent of the respondents reject the idea of incurring joint EU debt, as proposed by German Chancellor Angela Merkel and French President Emmanuel Macron, while 35 percent are in favor and 26 percent answered “undecided.”
The proposal to expand loss carrybacks for companies met with the greatest approval: 90 percent of the economists responded either positively or fairly positively. The staggered increase in the short-time allowance meets with strong approval from 43 percent, while 31 percent favor an extension of the period of entitlement to unemployment benefits and 31 percent support an earlier abolition of the solidarity surcharge. Providing creative artists with income compensation is considered by 25 percent of the economists to be a very good measure, as are investment grants for companies, which are also strongly supported by 25 percent.
A temporary VAT reduction for the restaurants and catering sector attracts more criticism than support: 43 percent saw it as either positive or fairly positive and 56 percent as either negative or fairly negative. Only 35 percent agree with a temporary VAT reduction for all sectors, with 63 percent rejecting the proposal. Meanwhile, 34 percent favor one-time payments to families, but 64 percent do not. Consumer vouchers for local shops are favored by 26 percent and rejected by 68 percent of the economists. As for a mobility bonus, 16 percent are in favor and 60 percent against.
Financial support for vacations in Germany is rejected by 89 percent of the economists. Purchase incentives for new cars were a complete flop, too, with 89 percent against them.
