Coronavirus

Germany is vastly outspending other countries with its coronavirus stimulus

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Key Points
  • Germany is going to need "as much support as possible" and it has "the fiscal space" to do it, Zsolt Darvas, a senior fellow at the Brussels-based think tank Bruegel and one of the authors of the data study, told CNBC Friday.
  • The data study also shows that European countries with more limited fiscal space have been "cautious" in stepping up their immediate contributions.
BERLIN, GERMANY - April 09: Federal Minister of Finance Olaf Scholz, SPD, makes a press statement before a video conference of the Euro Group on April 09, 2020 in Berlin, Germany.
Thomas Imo

Germany is spending much more than countries like the United States, on a relative basis, to mitigate the economic impact from the coronavirus, a data study has shown. 

The largest European economy has pledged a package which is worth more than half of its gross domestic product last year, and includes immediate fiscal stimulus, deferrals and other liquidity measures. In comparison, the fiscal plan in the United States is, so far, less than 15% of its GDP from 2019.

Germany is going to need "as much support as possible" and it has "the fiscal space" to do it, Zsolt Darvas, a senior fellow at the Brussels-based think tank Bruegel and one of the authors of the data study, told CNBC Friday.

The think tank has combined all the fiscal pledges made by 11 countries so far. They include Germany, France, Italy, the U.K., Denmark, the U.S., Spain, Greece, the Netherlands, Hungary and Belgium. The data corresponds to all government announcements made until April 18.

Germany is going ahead with 236 billion euros ($256 billion) in direct fiscal impulse measures, which include 100 billion euros to recapitalize and buy stakes in corporates affected by the virus, as well as 50 billion euros in direct grants to smaller businesses. 

Berlin has committed 500 billion euros in tax deferrals and 1.32 trillion euros in other liquidity and guarantee measures.

Across the Atlantic, the United States is deploying $1.17 trillion in immediate stimulus, $561 billion in deferrals, and $877 billion in other liquidity and guarantee measures, according to Bruegel's study. 

Darvas told CNBC that their fiscal programs will depend on the duration of the crisis. "I can imagine the U.S. will do more," he said via telephone.

Caution

According to Darvas, the data study also shows that European countries with more limited fiscal space have been "cautious" in stepping up their immediate contributions.

Italy and Spain, for instance, have put forward 0.9% and 1.1%, respectively, of their 2019 GDP into direct support.

In Rome, the government has opted for a larger share of tax deferrals to support the economy, representing 13% of its 2019 GDP. This option means that businesses and citizens don't need to service certain tax payments for some time, alleviating their burden and, in the meantime, the government does not increase its fiscal deficit as that money is still supposed to come in at some point.

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