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Coronavirus: Merkel's deputy considers extending short-time work scheme until 2022

·Germany Correspondent, Yahoo Finance UK
·3-min read
Olaf Scholz
Olaf Scholz is Germany's vice-chancellor and finance minister. Photo: Fabrizio Bensch/Reuters

The coronavirus pandemic is going to threaten companies for the foreseeable future, making it imperative for the government to keep up its financial support for employees, according to Germany’s finance minister Olaf Scholz.

Scholz, who is also Angela Merkel’s vice-chancellor, told Bild am Sonntag newspaper that he wanted to extend the short-time work programme from 12 to 24 months, noting that “the corona crisis won't suddenly go away in the next few weeks.”

“This is Germany’s greatest economic and socio-political act,” Scholz told the newspaper. “This is a masterpiece of the German state.”

Called “Kurzarbeit” (short work), the government programme was introduced during the financial crisis in 2008 to avoid mass layoffs. The government pays about 60% of a worker’s salary — more if they have children — and their employer either puts the worker on reduced hours or send them home if there is no work for them. That amount goes up to 70% of lost wages if people are on short-hours for more than four months, and after seven months, to around 80%.

READ MORE: German finance minister to run as chancellor candidate in 2021

The advantages of the scheme are not just ensuring people are not suddenly forced onto unemployment allowance, but also that employers can avoid a costly and time-consuming hiring push when the economy ramps up and they re-start operations.

Scholz added that companies and employees need a clear signal from the government that “we are going with you all the way through the crisis.” Extending the Kurzarbeit duration would cost billions of euros, he noted.

Merkel’s spokesman Steffen Seibert said at the Monday press conference that a possible extension to the Kurzarbeit program would need to be discussed at the next meeting of the coalition government, but that the chancellor was in principle open to an extension.

Millions of staff have been put on Kurzarbeit in Germany after government lockdowns, as well as the collapse of supply chains and consumer demand, forced companies to a standstill from March.

By May, 7.3 million people in Germany were on short-time hours, according to the Ifo Institute, which noted that the number had never been that high, even during the global financial crisis, when short-time working peaked in 2009 at just under 1.5 million.

The Ifo Institute estimated that about 5.6 million workers were on short-hours in July.

Scholz, a Social Democrat, last week threw his hat in the ring as a chancellor candidate in the race to replace Merkel next year.

Merkel, whose popularity has soared during the pandemic, has insisted this is her final term. Scholz, the former mayor of Hamburg, is a popular politician in Germany, however, his Social Democrat party is trailing far behind Merkel’s Christian Democratic Union in the polls.

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