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Germany Moves to Shutter Bars and Restaurants for One Month

Bloomberg logo Bloomberg 10/28/2020 Arne Delfs and Raymond Colitt

(Bloomberg) -- Chancellor Angela Merkel is pushing for a partial lockdown in Germany that would include closing bars, restaurants and leisure facilities through the end of November, as coronavirus infections continue to surge across Europe.

Merkel is also urging citizens to keep social contacts to an absolute minimum and avoid all non-essential private travel, according to a draft federal government briefing paper obtained by Bloomberg.

Germany will help companies affected by the toughest restrictions since the end of the spring lockdown by making up to 10 billion euros ($11.7 billion) in aid available in November, when the measures will be in place, according to a person familiar with the matter.

The chancellor, who has struggled to forge a national consensus in recent weeks, will seek an agreement with regional premiers on Wednesday in Berlin. The meeting, which is under way, was expected to be contentious, with some state leaders signaling opposition to the measures.

Like many of her European counterparts, Merkel’s hand has been forced by a spike in virus cases that has been gathering pace since the start of August, fueled by travelers and people failing to observe hygiene and distancing rules. French President Emmanuel Macron is also set to announce tighter restrictions when he addresses the nation on Wednesday evening.

graphical user interface: Germans are staying away from restaurants as virus cases rise © Bloomberg Germans are staying away from restaurants as virus cases rise

Merkel has pledged to do all she can to avoid imposing another lockdown as strict as the one that hammered Europe’s biggest economy in the second quarter.

Read more: New Europe Lockdowns Raise Prospect of ECB Stimulus Surprise

The latest steps -- which would take effect on Monday -- are designed to stem the spread of the disease while broadly allowing activity to continue. They’re likely to provoke protests from industry groups and from citizens already weary of what they see as government intrusion into their private lives.

Bloomberg Economics estimated that the impact of the measures will likely be much lower than the April lockdown, but still depress German output by about 0.6 percentage points in the fourth quarter.

What Our Economists Say

“Germany won plaudits for its handling of the first wave of the pandemic. The question now is whether the fresh restrictions will do enough to halt the spread. The risk, of course, is that the number of infections continues to climb and results in further economic damage”

-- Jamie Rush and Maeva Cousin, Bloomberg Economics. Read the full INSIGHT here.

Germany’s benchmark DAX Index fell as much as 4.2% and the Stoxx Europe 600 Index sank 3%, with auto and construction shares seeing the steepest declines. Haven assets, such as Treasuries and the yen, rose.

While most economists and investors still think the European Central Bank will wait until December to expand its bond-buying program, news of tighter curbs put them increasingly on guard for surprise action as early as Thursday.

Read more:
Even Germans Have Lost Control of Tracing as Infections Surge
Europe’s Capitals Mull Recovery Loans With Eye on Soaring Debt
East Europe Fights for Its Life Against Virus It Thought Crushed

Some states may refuse to back all of Merkel’s proposals, and they have already prompted a vice president of the lower house of parliament to declare that he won’t follow the new rules.

“I urgently warn against alarmism, which can also lead to erroneous decisions,” Wolfgang Kubicki, a Bundestag vice president from the opposition Free Democrats, said on Deutschlandfunk radio.

The government briefing document notes that effective contact tracing has become impossible in many parts of Germany. Without further restrictions, exponential growth in the number of infections would overburden the health system within a few weeks and lead to a significant rise in serious cases and deaths, according to the proposal.

a wooden bench in front of a building: Coronavirus Measures in Bavaria's Second Biggest City © Bloomberg Coronavirus Measures in Bavaria's Second Biggest City

Under the proposed German restrictions restaurants, bars, nightclubs and similar establishments will be closed.

Photographer: Michaela Handrek-Rehle/Bloomberg

Merkel’s government is also planning to extend and enhance assistance for sectors especially hard hit by the restrictions, such as hotels, restaurants, travel agencies and event management, Economy Minister Peter Altmaier told lawmakers. Aid for the self-employed and those working in the arts is under discussion, he said.

“We’re in a very difficult situation, the infection numbers are exploding,” Altmaier said in an interview with ARD television. “It’s a threat to the health system and therefore to human life and that’s why policy makers must act.”

Germany’s new coronavirus cases rose Wednesday by a record 14,964 to a total of 464,239, according to data from Germany’s public health institute.

“We are currently in a critical phase of the pandemic,” Health Minister Jens Spahn said after the cabinet approved new measures including expanding laboratory testing capacity and support for working parents. “The situation is serious.”

Proposed German restrictions:
Restaurants, bars, nightclubs and similar establishments will be closed
All leisure facilities, such as gyms, swimming pools, theaters, opera houses, concert venues, fairs, cinemas and leisure parks will be closed
People will only be allowed outside with members of their own household and one other; violations would carry penalties
Citizens urged to refrain from private travel and visits to relatives; hotel accommodation restricted to non-tourist purposes
Schools and daycare centers will stay open, as well as supermarkets and hairdressing salons, under existing hygiene regulations

While the situation in Germany is deteriorating rapidly, governments elsewhere in Europe are faced with even more alarming increases in infections and deaths.

French officials favor a one-month lockdown starting midnight Thursday, BFMTV reported, without identifying the source of the information. It will be more flexible than the initial shutdown in the spring, the report said.

French deaths linked to the virus jumped by 523 to 35,541, health authorities reported Tuesday, the biggest daily increase since April 22.

map: Virus Hotspots © Bloomberg Virus Hotspots

As governments grapple for an effective response, European Commission President Ursula von der Leyen stepped in with a set of proposals ahead of Thursday’s conference call with European Union leaders.

The measures include improving the flow of real-time data between member states, implementing rapid testing, expanding the use of mobile tracing apps, nudging countries to speed up vaccination strategies and creating common protocols to restore safe travel.

Read our QuickTake explainers:
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(Updates with company aid, economists comment, latest market reaction)

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