This week the cabinet extended the short-time work allowance. With this move, the German government wants to build on the successful use of this measure so far and benefit from it in the election year. The short-time working allowance has certainly proven to be a very effective crisis management instrument in earlier, relatively short recessions. However, the side effects increase with the duration of its application, and this is currently all the more true in combination with insolvency protection and growing state involvement. The short-time work allowance preserves structures and prevents necessary adjustments. Urgently sought specialists remain in companies whose business models often no longer exist or are severely damaged. As a result, the necessary renewal processes are increasingly overridden. And there is a growing danger that the German economy will continue to lose efficiency and competitiveness in the wake of the Corona crisis.
The Federal Government made many things right at the beginning of the crisis and was thus able to save the German economy from a deep and long crisis. However, the situation has changed over time. It is becoming increasingly obvious that we have to learn to live with the corona virus. The state must therefore also return to its core functions. This currently seems particularly challenging as the next federal elections are due next year. In the run-up to elections, the parties often tend to win the favor of their voters by bringing forward election gifts. However, the high national debt and the rising savings rate are clear signals that the current economic policy cannot be designed to last. Political realism can help to prevent disappointment and growing disenchantment with politics in the current phase.