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RECESSION

Government expects bad recession and big public deficit

The German economy is set to suffer its deepest recession since World War II, with growth in Europe’s biggest economy to slump by as much as 2.5 percent this year, Economy Minister Michael Glos has confirmed.

Published: 17 January 2009 09:53 CET
Government expects bad recession and big public deficit
not even this much growth - Glos (left) and Steinbrück. Photo:DPA

“This year, economic output is expected to fall by between two and 2.5 percent,” Glos said in an interview with the Welt am Sonntag released in advance of publication.

Germany entered a recession in the third quarter with two successive three-month periods of shrinking economic output.

Preliminary official figures on Wednesday showed that the slowdown accelerated sharply in the final part of the year, contracting by between 1.5 and two percent—the sharpest fall in two decades.

The new figures represent a huge downward revision to the government’s previous estimate of some growth, albeit minimal, of 0.2 percent.

The world’s largest exporter has been hit hard by a slump in global demand as the world economy nosedives amid the worst financial crisis since the 1930s.

In a bid to stave off the slowdown, Chancellor Angela Merkel’s government this week agreed a stimulus package worth €50 billion ($66 billion) to give the economy a much-needed boost.

The main thrust of the new package is a huge increase in spending on roads, railways, hospitals and schools.

Other elements include cuts in tax and social security contributions, as well as incentives for consumers to buy new “greener” cars to boost Germany’s ailing auto sector.

Merkel also plans to set up a €100 billion fund to help out firms struggling to secure sufficient credit to keep going – or at least loans without painful interest rates – from hard-up banks still reluctant to dole out cash despite Berlin’s €480 billion banking package rushed through late last year.

But her efforts will also lead to a huge increase in Germany’s public deficit to the point that it is set to breach EU rules in 2010, Finance Minister Peer Steinbrück told the Financial Times Deutschland this week.

Recent data have made it clear that Europe’s biggest economy is going south, with industrial orders and output falling off a cliff and unemployment to go over three million.

Figures from the German industrial federation on Wednesday showed foreign orders slumping by almost 30 percent in November. Deutsche Bank, meanwhile, the country’s biggest bank, unveiled a loss of almost €5 billion for the fourth quarter.

Commerzbank, the second largest lender, is set to be part nationalised with Berlin taking a 25 percent plus one share stake in return for €10 billion in desperately needed fresh capital.

And the government could buy one third or more of troubled property lender Hypo Real Estate (HRE), Germany’s biggest credit crunch casualty, a lawmaker from Merkel’s CDU party told AFP on Friday.

A total of €50 billion in cash and another 30 billion in loan guarantees already provided to HRE have not been enough to get its back on its feet.

GOVERNMENT

Was Norway ill prepared for the Covid-19 pandemic?

A report from a Norwegian commission appointed to assess the country’s management of the Covid-19 pandemic has concluded that while the government handled the situation well, it was poorly prepared for the crisis.

Published: 14 April 2021 17:11 CEST
Was Norway ill prepared for the Covid-19 pandemic?
Photo by Eirik Skarstein on Unsplash

The 450-page report was submitted to Prime Minister Erna Solberg by medical professor Stener Kvinnsland, who led the review.

The commission found that, generally, Norway had handled the pandemic well compared to the rest of Europe. That was in part due to citizens taking infection control measures on board.

“After a year of pandemic, Norway is among the countries in Europe with the lowest mortality and lowest economic impact. The authorities could not have succeeded if the population had not supported the infection control measures;” the report states.

However, the commission’s report also outlined that Norway did not properly prepare itself for the pandemic.

“The authorities knew that a pandemic was the most likely national crisis to have the most negative consequences. Nevertheless, they were not prepared when the extensive and serious Covid-19 pandemic came,” it said.

Prime Minister Erna Solberg said during an interview with the commission, conducted as part of its work, that the government did not have an infection control strategy of its own.

“We had a ‘we have to deal with a difficult situation’ strategy. We had to do everything we could to gain control and get the infection down. It was really only at the end of March (2020) that we found the more long-term strategy,” she told the commission.

Low stocks of personal protective equipment were another source of criticism in the report.

“The government knew that it would in all probability be difficult to obtain infection control equipment in the event of a pandemic. Nevertheless, the warehouses were almost empty,” Kvinnsland said at a press conference.

Norwegian health authorities were praised for the swiftness with which they implemented infection control measures. But the commission said that the decision should have been formally made by the government, rather than the Norwegian Directorate of Health.

READ MORE: Norway saw fewer hospital patients in 2020 despite pandemic 

The implementation of restrictions in March 2020 was critiqued for failing to ensure that “infection control measures were in line with the constitution and human rights.”

One-fifth of municipalities in Norway lacked a functioning plan in the event of a pandemic according to the report, and the government did not provide enough support to municipalities.

“We believe that government paid too little attention to the municipalities. The municipalities were given much larger tasks than they could have prepared for,” Kvinnsland said.

The report was also critical of Norway’s lack of a plan for dealing with imported infections in autumn 2020.

“The government lacked a plan to deal with imported infections when there was a new wave of infections in Europe in the autumn of 2020,” the report found.

“When the government eased infection control measures towards the summer of 2020, they made many assessments individually. The government did not consider the sum of the reliefs and it had no plan to deal with increasing cross-border infection,” it added.

The report also concluded that Norway allowed itself to be too easily lobbied by business when deciding to ease border restrictions last summer.

The division of roles in handling aspects of the pandemic was scrutinised in the report. Here, the division of responsibilities between the Ministry of Health and Care Services, The Norwegian Directorate of Health and the Norwegian Institute of Public Health were unclear.

The prime minister has asked the commission to continue its work.

“We are not done with the pandemic yet. Therefore, it is natural that the commission submits a final report. There will also be topics where the learning points can only be drawn later,” Solberg said.  

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