Germany’s lockdown measures lack ‘planning horizon’, uphill battle for businesses in Q1 – BDI

LONDON (ICIS)–Germany’s restrictions to mobility to slow the spread of the coronavirus pandemic will remain in place until at least 20 December, although the measures lack “sufficient planning horizon” and risk causing further pain for businesses in the winter months, the Federation of German Industries (BDI) said.

The country’s authorities agreed late on Wednesday to the extension to measures first implemented at the beginning of November in a so-called ‘light lockdown’.

The country’s chemicals trade group VCI said it would not comment on the measures but subscribed to the BDI statement.

The German chemicals sector is the largest in Europe, serving domestic key industries like automobile as well as exports. In 2019, it posted sales of €193bn and employed around 450,000 workers.

Germany’s ‘light lockdown’ during November shut retail, bars and restaurants, and leisure centres among others, but has failed to bring infection rates down unlike other major EU countries with similar measures.

France and the UK, with partial lockdowns in place during November, or Spain with a night curfew, have managed to significantly decrease infection rates as authorities race to free up space in health services for the upcoming flu/winter season.

None of the measures implemented during the pandemic’s second wave have affected chemicals plants which have been operating as normal.

The main German stock exchange, Frankfurt’s DAX index has been unfazed by the lockdown extension and was trading flat compared with the prior close; at 13:45 local time it was down 0.02%.

PLANT CLOSURES FEARS
The BDI, the largest trade group among German companies, said the most serious threat to the economy in 2021 would come from “large-scale” plant closures if the economy does not gain strength soon.

The BDI also said that while the outlook to the year end is clearer, mid- and long-term planning remains difficult. It  forecast that “more and more entrepreneurs” will struggle in the winter months.

“This [measures approved on Wednesday night] at least offers short-term orientation, but does not yet provide sufficient planning horizon for the economy,” said BDI.

“It remains important to keep economic activity going as far as possible and to keep schools, kindergartens and day-care centres open. It is essential to reduce the risk of yo-yo shutdowns for the economy and society.”

Although in the first wave and during the summer, Germany’s test and trace system was widely deemed a good example, infections rates spiked in September and October making test and trace impractical and forcing the shutdown.

German states – or landers – and the federal government agreed, as part of the extension, to reinforce the testing system, as well as a reduction in quarantine times when tests have certified a negative result.

This is key for workers not to have to be absent from work for long periods, or for industries like travel to return to a degree of normality as the pandemic hit them especially hard.

Businesses in Germany expect the extension approved this week to further dent economic growth in the fourth quarter and potentially into 2021 as well.

“The decisions will have an additional negative impact on economic activity and consumer sentiment,” said BDI.

The trade group said the state aid provided to businesses affected by the lockdown measures were a positive step in offsetting the loss of sales, but it was also clear in its diagnose: they are a “burden” on the public purse.

“This [spending by the state in aid] must not lead to a renunciation of future investments or to higher taxes,” said BDI.

LONG-TERM DAMAGE VS SHORT-TERM RELIEF
In its daily report on 25 November, the Robert Koch Institut that tracks Germany’s infection rates said that despite the lockdown there had been an increase in transmissions, with an incidence rate of 140 cases per 100,000 in the last seven days.

The figure is however much lower than its EU peers; the World Health Organization (WHO) has said 50 cases per 100,000 inhabitants is a manageable level, and it considers 250 cases per 100,000 critical.

See bottom map from the EU’s Centre for Disease Prevention and Control for incidence rates across EU countries as of 26 November.

“The high nationwide number of cases is caused by increasingly diffuse transmission, with numerous clusters in households, but also in community institutions, nursing and long-term care homes, as well as in occupational settings or related to religious events, said the RKI.

The Ifo institute, one of Germany’s key economic research institutions, said on Thursday all containment measures to slow down the spread of the pandemic would ultimately hurt some social sectors: students in some cases, certain economic sectors in others, or the economy a whole in the worst-case scenario.

While governments have pledged to keep the schools across Europe open, infection rates among teenagers have shot up in some countries like the UK, prompting calls from teaching trade unions to implement home schooling to drastically cut transmission rates.

“Policymakers have the following options to achieve a further reduction in infections: they can tighten restrictions at educational institutions, in the retail trade, or both, or they could even introduce wide-ranging restrictions on social contact and leaving the house, as with a hard lockdown,” said Andreas Peichl, director at Ifo’s centre for macroeconomics.

“In addition, every avenue for tracing chains of infection must be explored, including perhaps adding to Germany’s coronavirus warning app. Mass testing in high-risk regions and improvements in data collection should also be implemented. This would be more cost-effective than a blanket lockdown.”

The extension of restrictions agreed by the German authorities seeks to reduce the incidence rate to 50 by the Christmas holiday season, but Ifo argued that more measures would be necessary to reach that levels in such a short period of time.

Sending pupils home would drastically reduce transmission, said Peichl, but digital distance learning requires a digital infrastructure currently not in place; lacking the right infrastructure, home schooling would increase risks for the long-term as students’ learning would suffer greatly.

“Nevertheless, it is also possible to push the infection rate below 50 by Christmas even with normal school operations: closing and restricting further economic and business activities while keeping schools open would have the same effect as a ‘lockdown light’ with school closures,” said Ifo.

“So there is a need to weigh up which kind of damage should be classified as greater in economic and social terms: the long-term damage caused by restrictions in schools or the short-term damage caused by restrictions in other economic sectors.”

EU incidence rates
26 November 
Click on image to enlarge 

–

Front page picture and map source: European Centre for Disease Prevention and Control (ECDC)

Focus article by Jonathan Lopez