Germany has extended its furlough scheme until the end of next year at a likely cost of £27billion.
It is hoped that the move will help the economy to recover after the coronavirus pandemic saw the country’s GDP fall by 11.7 per cent over the first six months of the year.
More than 10.1 million workers, including one in three in the industrial sector, were on furlough at the peak of the Covid-19 lockdown.
Although this figure dropped to around 5.2 million by late July, it is thought that the economy will not get back on its feet until the end of 2021 or early 2022.
Angel Merkel’s party had previously voiced reservations about extending the furlough scheme due to the extensive cost.
But after an eight-hour negotiation among her coalition government they struck an agreement last night to extend the scheme by 12 months.
The German furlough scheme, known as Kurzarbeit, is open to any company which can demonstrate that at least 10 per cent of staff jobs are at immediate risk.
Recipients are initially paid a minimum of 60 per cent of their regular salary by the state but this rises to 70 per cent after three months and 80 per cent after six months – with those caring for children receiving slightly more.
The scheme has so far cost the German Federal Employment Agency (GFEA) around €12billion.
Labour Minister Hubertus Heil described it as ‘the stablest bridge over a deep economic valley’.
But he has suggested that the bill might now rise to as much as €36billion.
This would exhaust the GFEA’s cash reserves and would therefore require the finance ministry to intervene.
It was also agreed that the government would grant up to 20 days of paid leave to workers who were caring for relatives as well as extend its €25billion ‘bridging assistance’ fund aimed at small and medium sized businesses until December.
It comes as Germany continues its battle with the coronavirus pandemic.
The country has now recorded a total of more than 239,000 coronavirus cases and 9,352 Covid-19 related deaths, according to data from Worldometers.