Germany’s Scholz on Covid Crisis, Vaccines and Higher Taxes

This is not the time to consider a full reopening of the German economy, but rather the time to be tough and keep coronavirus infections low, Germany’s finance minister told CNBC, while adding that wealthier households will soon pay. more in taxes.

“There is no time to open. This is the time to be very tough, to keep infection rates low,” German Finance Minister Olaf Scholz told CNBC’s Annette Weisbach on Tuesday.

Europe’s most powerful economy has suffered from the coronavirus pandemic, having faced different waves of infections and subsequent lockdowns. In 2020, the German economy contracted by almost 5%, according to data from the International Monetary Fund, with only 3.6% growth expected this year.

At the same time, opposition to public health messages from national and regional leaders has further complicated the situation.

Armin Laschet, the leader of North Rhine-Westphalia, for example, said on Monday that there should be a national shutdown. But just last week he had asked for flexibility so that various state leaders could fight the pandemic as they see fit. Chancellor Angela Merkel also reversed plans for an Easter shutdown.

“If we could come up with similar measures everywhere, this would help a lot and make it more understandable,” Scholz said, referring to the different regional approaches.

There has been a growing call in Germany for a more united approach in the fight against the coronavirus. Citizens are frustrated with the different agreements between different regions, while infections continue to increase.

Merkel herself has called for a stricter and more uniform approach across the country, but regional leaders have so far prevented it.

As of Tuesday, Germany had recorded more than 2.9 million Covid-19 cases and 77,103 deaths, according to data from the European Center for Disease Prevention and Control.

At the same time, there are concerns about the timing of the launch of vaccination. Germany has distributed 22.8 doses of Covid-19 injections per 100 inhabitants as of Monday, according to the ECDC. This is lower than France, Cyprus, Ireland and Hungary, just to name a few examples in the EU as a whole.

Additionally, German health experts decided last week to discontinue the use of the Oxford-AstraZeneca injection for people under the age of 60 due to renewed concern over reports of blood clots. This could become another hurdle in the wider rollout, as fewer people are now eligible to receive this vaccine and the number of vaccines available remains relatively limited.

Speaking to CNBC, Scholz seemed confident about the next few weeks and months for the Covid vaccines.

“I think we will get to a situation where by the end of this month it will be 4 to 5 million doses a week,” he said.

“I think this will make the necessary advances and that is why we have to be strict now because if we are strict in reducing infections it will be easier to have the success of vaccination,” he added.

Scholz, a high-ranking figure in Germany’s Social Democratic Party, had previously said that the country must do whatever it takes to emerge from the coronavirus-induced crisis.

Germany is expected to borrow more than 240 billion euros ($ 283 billion) this year to prop up the economy, an issue that the most fiscally conservative lawmakers have questioned. Germany has had a long history of keeping its finances in check, having legislated in 2009 that governments could not incur new debt in any meaningful way.

The coronavirus pandemic has changed the dynamics around German debt as more experts argue that the government should continue to provide stimulus.

“We will continue to do whatever it takes. That is expensive, but doing nothing would lead to even higher costs,” Scholz told reporters late last month.

But with more loans, there will be more taxes.

Germany “will have the opportunity to cope with all the burdens that come from fighting the coronavirus with better growth in the coming years,” said Scholz, before adding: “Obviously there is a situation where there is no time for reductions in taxes for the rich. individuals or large corporations. “

“There is a need for tax relief for low and middle income people in households, but obviously those who are very wealthy, who have very high income and businesses cannot expect tax cuts,” he said.

Germany is preparing for the national elections at the end of September. Merkel, who has served as chancellor of Europe’s largest economy for 16 years, has said she will not seek a fifth term in office.

“I am sure that there will be a change after the next elections. As you know, I am running to be the next chancellor and my party wants to lead the next government and the possibilities are increasing,” he said.