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Insolvency moratorium: The worst is yet to come

August 13, 2020
Region:
The impact of the coronavirus pandemic on growth in the second quarter was dramatic, no doubt about it. But economic data, as well as the daily and weekly real-time indicators that are now being watched meticulously, show that most countries began to reemerge from the slump back in May. In Germany, production was down by “just” 11.5% year over year in June, after a drop of nearly 25% in April. [more]

More documents about "Germany"

288 Documents
November 6, 2020
Region:
1
The corporate sector in Germany and particularly SMEs have become more resilient in terms of funding which should help them weather the corona shock. Current financing conditions also remain favourable: banks have hardly tightened lending standards, the government has issued unprecedented credit guarantees and the ECB is eagerly buying corporate bonds. Nonetheless, corporate insolvencies will rise as a result of the deep recession. Because the government has temporarily waived the obligation to file for bankruptcy, insolvency numbers have continued to fall until now but this may change soon. Rising loan losses will have a significant impact on German banks which are already exhausted by years of zero interest rates and low structural growth. With loan loss provisions possibly tripling, the banking industry will probably record a net loss this year. [more]
November 2, 2020
Region:
2
Q3 GDP surprise: A rear mirror view – but obstacles right in front. With the partial lockdown during November, the economy will almost certainly see another negative quarter, even in an optimistic scenario where restrictions succeed in squashing new infections and will be completely abolished by the end of November. Prepare the German healthcare sector for regional bottlenecks – protect risk groups better: The number of patients in intensive care and hospital capacity is just as important as the number of new infections. We estimate that 400,000 acutely infected patients are the limit for intensive care units. (Also in this issue: inflation outlook, German labour market, corporate insolvencies, German auto industry, global construction industry, German corona policy, open borders in the EU) [more]
October 8, 2020
Region:
3
After the summer break new cases have picked up strongly in most of Germany’s neighboring countries. In many cases (France, Spain, UK, Netherlands, Poland, Czech Republic), numbers are (by far) exceeding the peaks reported in spring or are back at these levels (Belgium, Austria). Various governments have introduced new measures, such as Paris shutting down parts of the hospitality and leisure sector, and Spain ordering a partial lockdown in Madrid, albeit not as encompassing as in April. In other countries, social distancing and mask-wearing rules have been tightened or are being discussed. [more]
October 2, 2020
Region:
4
The sizeable fiscal gaps in 2020/21 caused by the corona pandemic – which, just at the federal government level, are reflected in record new borrowing of around EUR 218 bn and EUR 96 bn, respectively – are a harsh setback for ensuring long-term public debt sustainability. In this week’s debate on the federal budget Finance Minister Scholz assured that no fiscal action in response to the crisis would be more expensive than fiscal action. But for the next federal government this appraisal might also hold true – but then with respect to fiscal consolidation. [more]
September 24, 2020
Region:
5
We have lifted our GDP forecast for 2020 to -5.5% and see the economy expanding by 4.5% in 2021. An important factor is that the rebound during Q2 – when GDP contracted by 9.7% – turned out more dynamic than expected. The momentum carried over into July. Even with some likely short-term moderation in August, we now expect Q3 GDP to increase by 6.0% qoq. Together with a 2.5% expansion in Q4, this should result in an annual GDP drop of “only” 5.5%, compared to the 9% expected in early May at the height of the pandemic in Europe. The higher carry-over lifts our 2021 GDP growth forecast to 4.5%, despite somewhat weaker momentum in H1 than expected earlier. (Also in this issue: labour market, bilateral exports, fiscal outlook 2020-22, German industry, the race for CDU leadership, and federal election prospects.) [more]
September 23, 2020
Region:
6
The two August mass demonstrations against the corona measures in Berlin attracted wide media attention and rattled the public. Many felt confirmed in their feeling that the corona crisis is driving society further apart. Current surveys, however, show that 80% of Germans firmly support the government and trust in government is at a record high. Rather, the protests go beyond the corona crisis, which might be a door opener for general system criticism. The causes for criticism and uncertainty are more likely ongoing long-term trends such as the loss of western supremacy, demographic change, climate change or digitalisation. [more]
September 9, 2020
Region:
7
The corona crisis has forced many employees to work from home. A consensus seems to be emerging that this is becoming the new normal. Many companies have already offered their employees the option to work from home for several days per week, even post-COVID. An enforceable right for employees to work from home would imply that employers must compensate employees for the additional living space required for home offices. In this paper we analyse the long-term implications of such legislation. We find serious side effects, in particular for the real estate market and the labour market. [more]
August 10, 2020
Region:
8
Monthly data point to a strong pickup in economic momentum during the course of Q2, in part due to catch-up effects. Still, after the unprecedented 10.1% GDP contraction in Q2 we expect a 5% increase in Q3 followed by a 2% rise in Q4 (consensus: 5.2% and 2.4%). We now expect German GDP to contract by 6.4% (compared with -9% predicted in early May) followed by a 4% increase in 2021. Still, the pre-COVID output level will not be reached before mid-2022. The current exceptional volatility in monthly data and the further development of the global pandemic imply that the error margins remain exceptionally high. (Also in this issue: Merkel’s strength might become a burden for her potential successors.) [more]
July 20, 2020
Region:
9
The German export sector has had to cope with numerous challenges over the last few years. These include “homemade” problems, above all in the auto industry, but also the shift in US trade policy. Climate change has become an increasingly important issue, too; in fact, it implies massive changes. That is why the long-term trend in many manufacturing sectors appeared unclear even ahead of the coronavirus pandemic. Now, COVID-19 has compounded already existing uncertainties. From our vantage point, a number of reasons support our hypothesis that continental value chains are likely to gain importance. [more]
July 13, 2020
Region:
10
In 2019, net migration to Germany amounted to +327,100, a significant decrease compared to the previous years. Particularly striking is the sharp decline in immigration from Poland and the sharp increase in the number of immigrants from India. In 2020, immigration is likely to collapse due to the COVID-19 crisis. Subsequently, we expect higher number again. The migration over the coming years might be driven by the skilled worker immigration law which came into force in March 2020. Also, the very good epidemiological situation in Germany compared with many other countries might be a pull factor. If net migration then returns to more than 300,000 people per year, the population is likely to rise from 83.2 million today to over 84 million by the early 2030s. [more]
July 9, 2020
Region:
11
With Germany’s rather successful COVID-19 strategy and the recovery and stimulus packages broadly agreed, the question of Merkel’s successor and the next German federal elections in autumn 2021 are gradually getting closer political attention again. Parties are currently not only preparing for the election, but are also arguing about the electoral law: the present law allowed the Bundestag to grow from 598 mandates to the current record size of 709 mandates, with the 2021 election likely to result in an even bigger number of seats. The Bundestag just failed to pass a reform before the summer break and thus in time for the 2021 elections. However, political and public pressure to find a solution is high and will keep the issue on the political agenda. [more]
July 1, 2020
Region:
Analyst:
12
During the corona summer, Germans will probably travel less and for shorter periods of time than in former years. Destinations in Germany and in the neighbouring countries, which are only a car journey away, look set to benefit. In contrast, European holiday destinations which are usually reached by plane will see the number of tourists decline in 2020. Spain will probably be the main loser. Long-distance travel will not play a major role in 2020. The cruise boom is likely to come to an abrupt end. In 2020, the total amount spent by Germans abroad is likely to decline by 10-20%. Once the coronavirus crisis is over, climate and environmental regulation (in particular for the transport sector) will return as the main structural challenge for tourism. [more]
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