Given the dynamic spread of the pandemic, the Federal Government and the sixteen Länder have agreed on a set of targeted temporary measures to stop the wave of infections and contain the spread of the virus. Yesterday’s agreement also entails temporary shutdowns for certain sectors.
In spite of government aid, many of the businesses, self-employed, associations and establishments affected by the new regulations are still suffering from the impact of the contact restrictions imposed in the spring. The Federal Government will therefore provide swift and far-reaching support in the form of targeted short-term relief measures unmatched in scope by any existing support programme.
In the words of Minister of Finance Olaf Scholz: “This month will be a moment of truth. The situation is alarming, with the virus spreading at a dynamic pace. It is therefore essential that we take further temporary measures to protect lives and safeguard our economy. We stand ready to assist companies, the self-employed and employees. We will put all our energies into supporting particularly those sectors that have been hit hardest. Together, we have been able to handle this crisis fairly well so far. Guided by reason, confidence and solidarity, we shall also overcome the next stage of this crisis.”
In the words of Economic Affairs Minister Peter Altmaier: “The decisions that were taken yesterday are necessary and correct in order to slow down the rapid spread of the coronavirus and to halt the wave of infections. These are times that call for unity and mutual solidarity. In this difficult situation, we cannot leave our companies and their employees to cope on their own. Instead, we will further increase the support available for the self-employed, companies and establishments affected. We have to do everything we can to safeguard the substance of our economy in order to hit the ground running again after the crisis.”
Totalling up to €10 billion, the exceptional business aid is to be financed from existing funds earmarked for (in German). We have been forward-looking in our planning and enjoy a solid financial position.
The exceptional business aid provided by the Federal Government will support those businesses that have to be temporarily closed due to measures necessary for the containment of the pandemic.
Companies, the self-employed, associations and establishments are eligible to apply if they are prohibited from doing business as a result of the new regulations or of a regulation already in place. Further action is soon to be agreed on to support those suffering from the new regulations indirectly, but to a similar extent.
The business aid will be disbursed as a one-off payment. The aim is to help the companies affected in a straightforward and non-bureaucratic manner. Particular focus is being placed on fixed costs that are still incurred despite the temporary closures. In order to keep the procedure as simple as possible, these costs are approximated via turnover, with average weekly turnover in November 2019 serving as a point of reference. For companies with up to 50 employees, some 75% of the determined turnover will be reimbursed. By identifying fixed costs on a flat-rate basis, it is thus possible to avoid complicated cost accounting exercises. Since EU State aid legislation imposes certain limits on the scope of government support, the percentages applying to larger companies are determined on the basis of the relevant caps under State aid rules. Once granted, the exceptional business aid is offset against government payments concerning the time period in question that have already been received, e.g. short-time allowance or bridging assistance, or against any payments from bridging assistance still to be disbursed.
Support will also be given to young companies. For companies founded after November 2019, turnover is determined using October 2020 as a reference period. Own-account workers are given the option to indicate their average pre-year turnover for 2019 as a reference point.
The Federal Government is working hard to ensure the swift implementation of application procedures and the efficient processing of the aid. Therefore, the possibility of making advance payments is also being considered.
Applications are to be filed via the standardised nationwide IT platform for bridging assistance () (in German). Thus, an infrastructure will be used that has proven its worth over the past few months.
At the same time, loan programmes will be made available by KfW to provide additional support for small enterprises. KfW’s Quick Loan has proven effective in assisting German SMEs as they weather the coronavirus crisis. It is now to be made available to own-account workers and companies with up to 10 employees.
Companies can apply for KfW Quick Loans worth up to €300,000, depending on the turnover recorded in 2019, via their main banks. The Federation bears the full risk and exempts the main banks from liability.
Finally, the tried and trusted bridging assistance schemes are being adapted to the changing environment. Bridging assistance will be extended for the period between January and June 2021 (Bridging Assistance III) and its terms improved. In the coming months, several economic sectors, e.g. the cultural and events industries, are expected to continue facing severe constraints on business operations. The Federal Ministry of Finance and the Federal Ministry for Economic Affairs and Energy are working full steam on the details of the scheme.