(Bloomberg) -- Chancellor Angela Merkel’s government secured emergency powers, unlocking a historic rescue package designed to cushion the blow of the coronavirus pandemic.
A majority of lawmakers in the Bundestag voted on Wednesday to set aside constitutional debt limits to combat the crisis, according to the legislature’s president.
The extraordinary authorization is part of a packet of legislation aimed at protecting German jobs and businesses. These measures -- including new borrowing of 156 billion euros ($169 billion), equivalent to half of the country’s normal annual spending -- were also approved. The Bundesrat, or upper house of parliament, will vote on Friday.
“There is no blueprint for countering such a crisis,” which poses a challenge to modern life, Finance Minister Olaf Scholz said in the Bundestag in Berlin, filling in for Merkel who is at home in precautionary quarantine. “We’re doing that with an enormous amount of money, as precisely as possible.”
The package comes as the economy braces for its biggest slump in decades. Business confidence is collapsing at a record pace amid restrictions to slow the spread of the disease, and the Ifo economic institute predicted mass bankruptcies in what is likely to be a deeper recession than during the financial crisis.
Germany’s ruling coalition of Merkel’s conservative bloc and the Social Democrats cast aside infighting to push for emergency powers, abandoning its long-standing balanced-budget policy in the process.
Backed by broad political support, the government plans to unleash a barrage of debt-financed measures totaling more than 750 billion euros to counter what Merkel called the biggest challenge to Germany since World War II. The package includes loans, guarantees and aid for large and small companies as well as money to buy stakes and even completely nationalize some stricken businesses.
The country, which tightened lockdown measures this week, has about 32,700 cases and more than 150 deaths, according to data compiled by Bloomberg.
Germany’s containment measures are affecting the legislative process. Lawmakers were disbursed around parliament to adhere to distancing requirements, and the podium was disinfected after every speaker. Rather than lining up at ballot boxes at the front of the plenary hall in the glass-domed Reichstag, members cast their votes at several urns arrayed around the building.
Governments around the world are trying to cope with an influx of patients into hospitals and the effects of keeping everyone indoors. Euro-area finance ministers took a small step toward a rescue package for struggling member states on Tuesday as fatalities climbed in Italy and Spain and evidence piled up of the coronavirus’s crippling economic impact.
Aside from the current emergency relief, Germany’s government is evaluating a stimulus program to help revive the economy once the pandemic is contained. The measures, which could involve consumer spending and corporate-tax relief, would be targeted for short-term impact, according to a person familiar with the discussions.
“When at some point we are able to get this pandemic under control and we can see economic light at the end of the tunnel, then there will certainly be growth measures to get the economy going,” Labor Minister Hubertus Heil said on Deutschlandfunk radio. “But the strong and positive message is that we are well prepared for such situations. We are a strong social state. We’re not like in America.”
Still, the clock is ticking. Economists warn that the damage will intensify with each day that consumers and businesses are forced to halt normal activity.
“We will have some layoffs, but again if this is just about a few weeks, then I think the number of layoffs will be limited. If it’s longer, it will get worse.” Ifo President Clemens Fuest said in an interview with Bloomberg TV. “We’re moving into the unknown here really.”
(Recasts after parliament vote)
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