German industry welcomes Scholz’s proposal to extend short-time work scheme

German industry on Monday (17 August) welcomed Finance Minister Olaf Scholz’s (pictured) proposal to double the period over which state aid is paid under a government short-time working scheme to prevent unemployment surging further during the COVID-19 pandemic, writes Michael Nienaber.

Short-time work, also known as Kurzarbeit, allows employers to switch employees to working fewer hours or even none during an economic downturn. It aims to stop immediate shocks such as the coronavirus crisis from leading into mass unemployment.

Under the scheme, companies can apply for state aid to keep skilled workers on the payroll despite a lack of orders and avoid lay-offs for a limited time of currently up to 12 months, with the government paying two-thirds of the lost net income.

The scope of the scheme, instituted years before coronavirus, was widened in March as the pandemic hit and now Scholz wants to extend its cover to 24 months, as its effects on the economy could be long-lasting.

The VDMA engineering association said the instrument was saving many jobs, as it did during the financial crisis in 2009.

“That’s why Finance Minister Olaf Scholz is on the right track if he wants to extend the period for receiving short-time work allowance to 24 months,” said the association.

Scholz told Bild am Sonntag newspaper he wanted to give workers and companies more planning security and ensure their personal safety as the pandemic would not “simply go away” in the next few weeks.

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“Companies and employees need a clear signal from the government: We will go with you all the way through the crisis so that no one is laid off without any need,” Scholz said.

The Kurzarbeit extension is expected to cost the government up to €10 billion (£9bn).

Chancellor Angela Merkel’s conservatives are generally cautious when it comes to extending state aid instruments but her spokesman said that she was generally open to Scholz’s idea, adding coalition parties would now discuss the details.

The Social Democrats, Merkel’s coalition partners, last week picked Scholz as their chancellor candidate for next year’s election. He could replace Merkel as chancellor, depending on who the conservatives choose to run and how the Greens fare during the election campaign.

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