Germany extends coronavirus pay top-up scheme

Germany has agreed to extend a scheme that tops up pay for workers affected by the coronavirus pandemic by another year.

As well as prolonging short-term work subsidies, coalition parties also agreed to continue financial help for small and medium-sized companies.

It was announced on Tuesday that the German economy contracted by a record 9.7% in the April-to-June quarter.

The figure was revised from an earlier estimate of a 10.1% contraction.

The decision to extend the support measures came after seven hours of talks between politicians of the conservative Christian Democrats (CDU) and their centre-left coalition partners, the Social Democrats (SPD).

Short-time work subsidies had been due to expire in March 2021, but were extended until the end of next year.

These protect jobs by allowing employers to reduce employees’ hours while keeping them in work.

The state helps to cushion the economic blow for affected workers.

This scheme, known in German as Kurzarbeit, has often been credited with helping limit the rise in unemployment in the wake of the financial crisis of 2008-09.

Bridging aid for small and medium-sized firms had been due to end this month, but will now run until the end of this year.

Finance Minister Olaf Scholz told German television the extensions could cost up to €10bn (£9bn).