The Bundesbank warns of “zombie companies”

The restrictions due to the corona pandemic are likely to hit the economy hard again in the final quarter. The Bundesbank sees dangers in misunderstood help.

Just one more day to go shopping, like here in Göttingen

DThe Bundesbank expects the tightening of restrictions as a result of the corona pandemic to put a further damper on the German economy in the final quarter of 2020. The containment measures that have been in place since the beginning of November “will interrupt the economic recovery and will likely lead to a setback”, writes the central bank in its monthly report December, which was released on Monday. “However, the gross domestic product is only likely to fall relatively slightly in the last quarter of the year and by no means to the same extent as in spring.”

In the second quarter, German economic output slumped by 9.8 percent compared to the previous quarter as a result of the corona-related lockdown, followed by an unexpectedly strong recovery of 8.5 percent in the summer. For 2020 as a whole, the Bundesbank expects a minus of 5.5 percent. In 2021, the German economy should gradually come out of the Corona low with 3.0 percent growth.

The latest Bundesbank assessments have not taken into account the measures that the federal and state governments only decided on Sunday: Because the corona virus is spreading rapidly, life in Germany will once again be drastically reduced. From this Wednesday until January 10th, for example, the retail trade with the exception of shops for daily needs will have to close.

“In view of the extraordinary economic downturn in the current year, it can be assumed that the number of insolvent companies will increase significantly in the coming quarters,” warns the Bundesbank in its monthly report. However, there is also an increasing risk that companies will be kept alive that are actually not viable: “zombie companies”.

It must be avoided “that unprofitable business models persist in the market and that resources are used inefficiently for the economy as a whole,” affirmed the Bundesbank. “This also means that the current state aid measures, such as easing the use of short-time working, guarantees for corporate loans or tax relief, should only be maintained for as long as necessary and scaled back in line with the economic recovery.”