Germany’s furlough scheme saves firms from freefall

Story of one Berlin travel agent illustrates how the Kurzarbeit scheme has kept businesses afloat

Wed 23 Sep 2020 20.17 BSTLast modified on Thu 24 Sep 2020 04.37 BST

A street in Berlin’s Kreuzberg district.

Without Germany’s furlough scheme, called Kurzarbeit (“short work”), Wulf Scheunert’s travel agency BITS would by now be “in freefall”, as he puts it.

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The small tour operator, which organises trips to the UK and Ireland for German tourists, from an office in Berlin’s Kreuzberg district, was hit particularly hard by a pandemic that made travel to the British Isles unattractive.

In March, when business usually gears up for the summer season, booking requests suddenly dropped to zero. Company director Scheunert had to let go two freelance workers and was struggling to see how he could afford to pay his only full-time employee, who has worked for the specialist travel agent for 15 years after completing her apprenticeship there.

Kurzarbeit, an unemployment benefit paid out to companies by the government’s Federal Employment Agency, enabled him to keep his only employee on staff while reducing her hours, with the state helping to compensate her lost earnings.

The employee did not have to stay at home, but has continued to come into the offices for 10-12 instead of 40 hours per week, helping to cancel or postpone clients’ holidays that had already been booked.

“Without Kurzarbeit, I would have had to fire my employee and may have never been able to rehire her,” said Scheunert. “Years and years of training, priceless expertise and numerous personal contacts would have been lost.”

The story of the small Berlin travel agent mirrors the picture in the country as a whole: while the economic output of Europe’s powerhouse suffered a 10% slump in the second quarter of 2020, the furlough scheme has so far largely absorbed the accompanying shock on the labour market.

German unemployment in August was at 6.4%, an annual increase of only 1.3 percentage points.

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