And in one bound she was transformed. For Angela Merkel, the days of being lampooned as the archetypal Swabian housewife keeping tight control over the purse strings are over. Now, courtesy of a €130bn (£116bn) stimulus package, she is the spend, spend, spend chancellor.
Make no mistake, much of the past criticism of Germany’s frugal approach to government spending and budget deficits was justified. Saving some money for a rainy day is one thing but running surpluses worth 8% of national output was unnecessary and harmful to the global economy.
Nobody can accuse Europe’s biggest economy of stinting on this occasion. The package was bigger than expected and, at about 4% of GDP, doubles the size of Germany’s tax and spending stimulus since the start of the crisis.
Germany showed the rest of Europe what was needed to limit the spread of the virus: a decentralised testing programme; a manufacturing sector capable of producing medical equipment quickly; and a political system that prizes results over grandstanding. Now it is showing other countries how to do the recovery.
It is not just a question of money, important though that is. The package is a well-crafted mixture of a short-term spending boost, targeted support for those parts of the economy that need it and measures that will help lay the foundations for long-term sustainable growth.
There is a time limited cut in VAT lasting from July until the end of the year, which should persuade German consumers to spend some of the euros they have accumulated during lockdown. There is recognition of the pressure on families, with a payment of €300 per child, extra incentives to buy electric cars, and grants worth €25bn for small businesses in those sectors, such as hospitality, that will take longest to recover from lockdown restrictions.
All that will ensure Germany will be one of the first countries to get output back to its pre-crisis levels. Yet, the package also included €50bn for investment programmes, with a focus on making the transition to a greener economy.
All this is a bit of a contrast to the UK experience. So far, Rishi Sunak has administered large amounts of expensive sticking plaster to the economy but not much more. As he contemplates options for a summer mini-budget, the chancellor could do worse than to study what the Germans have come up with. A lot worse, in fact.
Business as usual when it comes to corporate behaviour
After a little bit of pressure, the Bank of England has revealed the names of the big companies that have been taking advantage of its coronavirus corporate lending scheme and how much they are in for. An interesting list it is, too.
For those a little confused by the blizzard of government schemes designed to keep business going through the pandemic crisis, the Covid corporate financing facility (CCFF) allows a company to sell its short-term bonds to Threadneedle Street in exchange for cash.
Few would quibble with the basic principle behind the CCFF. The government stopped planes from flying, football clubs from playing and shops from opening so it was obliged to give the likes of British Airways, Tottenham Hotspur FC and John Lewis a helping hand. The alternative was to turn Britain into a tumbleweed economy.
So far, the Bank has lent £16bn to more than 50 businesses. To qualify, a company need not be UK-owned. It merely has to have sizeable revenues in this country and be a sizeable employer. That explains why the German chemicals company BASF came to be the biggest borrower from the Bank under the scheme, with £1bn outstanding, and that Nissan has borrowed £600m.
Clearly, it would be foolish to deny a company help because it is foreign-owned, since all the evidence is that German, French, Japanese and US run companies are more productive than indigenous businesses.
A much more serious criticism is that the money has been provided with no strings attached. BA has announced 12,000 job losses despite securing £300m from the scheme. EasyJet tapped the CCFF for £600m but said it will axe 4,500 jobs – 30% of its workforce. The government appears not to have received or even asked for any job guarantees from companies, nor to demand that a quid pro quo for state support should be a reduction in the airlines’ carbon footprint.
All crises represent an opportunity as well as a threat. The opportunity here was for the government to use its financial leverage to change corporate behaviour for the better. That opportunity has been blown.