Question

In: Economics

Give one fact why Germany is better off after the pandemic

Give one fact why Germany is better off after the pandemic

Solutions

Expert Solution

Germany will be better off compared to other powerhouses following the pandemic. Despite the tech prowess of United States and China they are running up too much debt and their governments have been inefficient in their handling of the pandemic.

However, the response of Germany has been impressive. The reaction to the pandemic has put light on the pre-existing strengths: efficient government, minimal debt, a reputation for industrial efficiency that supports its exports even as global trade declines, and a growing capacity to give rise to domestic tech companies in a world dominated by the American and Chinese internet giants. Other countries fear that recent layoffs may become permanent, but German workers have stayed on the payroll beacuase of the Kurzarbeit, a century-old government system which pays companies to retain employees on few hours through temporary crises. Germany was fortunately able to expand the Kurzarbeit. Germany went into the pandemic having a government surplus, it could support its locked-down economy with aid amounting to 55 percent of gross domestic product, which is almost four times multiplied the United States’s rescue package as a proportion of G.D.P. It was also willing, for the first time, to provide emergency stimulus funds to its neighboring countries.However Germany is not dropping its commitment to balanced budgets. Germany's debt is expected to riset only to 82 percent of G.D.P. which is less than the likes of US and other countries which also have less financial stimulus packages.

This efficient allocative structure is one of the major reasons why Germany will be better off post pandemic.


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