Berlin According to Bundesbank President Jens Weidmann, the German economy is in the process of overcoming the corona shock. “Overall, the data show that the economy bottomed out in the spring and is gradually recovering,” said Weidmann after a preliminary report from the weekend to the newspapers of the Funke media group.
However, the sectors would progress at different speeds. “Industry, for example, is lagging behind.” It depends, among other things, on global demand and thus also on the development of the pandemic abroad.
Weidmann calls for control mechanisms for the use of the multi-billion dollar corona aid, so that the funds are used sensibly and efficiently. “Basically, I think community debt for extensive transfers is questionable,” he warned. “At the very least, the package should not serve as a springboard for large-scale EU debt for regular household financing.”
However, it is important that the EU has proven able to act in the crisis. “Solidarity in Europe – also financial – I think is right in this situation,” said central banker Weidmann.
At the latest summit, the EU countries had had a hard time agreeing and wrestled for four days and nights. The way for the overall deal was cleared after the so-called frugal states accepted that common debts would be raised and money would go to EU states as a grant. In return, Germany, France, Italy and Spain agreed to reduce the total of these grants from € 500 billion to € 390 billion.
Corona help should be limited in time
The economist considers the increasing public debt in Germany to be manageable because of the measures taken to counter the economic consequences of the crisis. “We expect a debt ratio of around 75 percent of economic output this year,” said Weidmann. Although this is a sharp increase in German public debt, which in 2019 was just under 60 percent of gross domestic product. “But it can be lifted further.”
In his view, the Corona help should be limited in time. “Then they automatically expire in the further course, and the public finances stabilize again,” he said. But the state should withdraw quickly after the crisis. “The state is not the better entrepreneur.”
The Bundesbank boss did not rule out a second aid package. It may be that more has to be done. The development is very uncertain. “But now it is important to wait and see how the measures adopted work.”
Politicians should also “regularly check short-time work benefits,” Weidmann said. It makes sense to use this instrument to bridge a temporary economic downturn. “The short-time work allowance should not, however, solidify structures that have no future, for example when business models are outdated.”
Central bankers were also asked about cash and the corona virus. “We do not consider a special quarantine for our cash necessary,” he told the newspapers of the Funke media group, according to Sunday’s preliminary report.
Despite a counter trend: Cash will still be available in 10 years
The transmission risk for coins and notes is no higher than for other everyday objects. Therefore, the usual hygiene rules should be observed. “Incidentally, I am not aware that someone had contracted the corona virus through a banknote,” added Weidmann. China had quarantined banknotes at the start of the pandemic to prevent possible contamination from contaminated banknotes.
The currency keeper was convinced that there would still be cash in ten years. “There is a creeping trend away from cash usage towards electronic means of payment,” he said. This trend had intensified with the start of the corona pandemic.
“But cash remains very important for many citizens,” says Weidmann. It helps one or the other to keep a better eye on the expenses. Data protection also plays a role. Some also see coins and notes as a kind of freedom.
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