The Brandenburg Gate casts long shadows over the almost deserted Pariser Platz, April 15, 2020 in Berlin, Germany.
While much of western Europe has struggled to contain the coronavirus pandemic, Germany has appeared to navigate the outbreak relatively smoothly, with widespread testing and contact tracing that has helped keep its death rate far lower than its peers.
Perhaps, then, it’s time to look to Germany for how to lift the lockdown too.
On Monday, Germany started to tentatively lift its restrictions, with smaller retailers of under 800 square meters being allowed to reopen, as long as hygiene and social distancing measures could be maintained. Larger car dealerships, bike shops and book shops have also been allowed to open their doors.
The country’s influential and economically-vital car industry has lobbied hard for lockdown measures to be eased, and car group VW opened one of its major manufacturing plants in Germany, in the city of Zwickau, on Monday, with more plants to follow next week.
Schools will reopen on May 4, with priority given to students taking exams. Large, mass gatherings will remain banned until August 31, however, and restaurants, cinemas and large retail stores remain closed for now. In short, Germany appears to have a clear plan for how to reopen its economy.
Germany has 147,065 confirmed cases of coronavirus, according to data compiled by Johns Hopkins University (JHU), and has registered 4,862 deaths.
These figures are starkly lower than some of its European neighbors: As of Monday, Spain has recorded 20,852 deaths (and over 200,000 cases of the virus), Italy has seen over 24,000 deaths and France over 20,000 deaths while the U.K. death toll has risen to 16,550, according to JHU.
On Friday, Germany’s Robert Koch Institute, which has collated the country’s coronavirus data, said the reproduction or transmission rate (the number of people that each infected person goes on to infect) had dropped below one for the first time. This is a closely-watched measure and led Germany’s Health Minister Jens Spahn to declare: “as things stand today, the outbreak is again controllable.”
Strategists noted that Germany had the right strategy when it came to managing the coronavirus outbreak and that others could learn from Berlin.
“(The) bottom line was Germany was better prepared, more decentralized (with a dispersed number of labs able to institute large-scale testing quickly, and the ability to contact trace) and swifter to react,” Bill Blain, a strategist for investment firm Shard Capital, told CNBC Monday.
He said countries like the U.K., where he is based, which has been criticized for not carrying out nearly as many tests or contact tracing, should learn from Germany’s example.
“The next stage is getting economies reopen, and again Germany is in a better position because of more testing and contact data. In the continuing absence of good data, the U.K. would be wise to watch carefully what Germany does,” he noted.
Germany’s cautious re-opening of its economy could also give other European economies that are yet to lift restrictions (such as the U.K. and France) an insight into how consumers, and consequently the economy, will react.
“One of the questions is going to be, if you’ve been sat at home during lockdown you’re effectively forced to save money … so are people going to rush out and spend as soon as the shackles of lockdown are partially lifted?,” Paul Donovan, chief economist at UBS Global Wealth Management, said on CNBC’s Squawk Box Europe Monday.
“When we look at things like the Google location data and the anecdotal evidence from Germany, that’s going to be a very useful indication.”
A lady walks past a sign in Berlin, Germany advising people to stay at home amid the coronavirus pandemic.
Donovan also highlighted that any second waves of the virus will come with a “greater preparedness.”
“So the healthcare systems will be better able to deal with the strain and people will also generally be better prepared, and companies too …so the economic damage of further waves of the virus is diminished,” he said, adding that subsequent lockdowns would also likely be on a smaller scale.
One size doesn’t fit all
Germany is certainly not immune to the economic downturn of the lockdown, however. The International Monetary Fund predicted last week that the German economy will contract by 7% in 2020 due to the coronavirus. On Monday, the county’s central bank, the Bundesbank, said in its monthly report that the economy was in a severe recession and that a recovery was unlikely to be quick, given that “substantial restrictions” were likely to remain in place for some time.
While it could be useful to scrutinize how other countries lift their lockdowns, economists stressed that there is no “one size fits all” approach.
“I don’t think there’s going to be a single model that people can point to and say ‘do it that way’ in terms of the sequencing of opening (economies) back up, or indeed when things should be opened back up,” Neil Shearing, chief group economist at Capital Economics, told CNBC Monday.
“Countries will open up at different times, sectors will open up in different ways,” he said, highlighting that Germany’s opening of car showrooms was “clearly a reflection of the importance of the car industry” in the country.
However, he added that although there is “no one-size-fits-all approach here, there will be some commonality and part of that will be the opening up of the economy sector-by-sector.”