Covid-19 Aid

The COVID-19 pandemic put Germany and many other countries in an acute economic state of emergency.
Lockdowns, disrupted supply chains and changes in consumer behaviour led to significant losses in revenue – particularly for micro-enterprises, small and medium-sized enterprises (SMEs) and self-employed individuals with limited cash reserves. To cushion the economic impact, the German government introduced a comprehensive package of measures, including emergency aid, bridging aid and other support programmes.

The ZEW “Economics of Innovation and Industrial Dynamics” Research Unit, in collaboration with Prognos and on behalf of the Federal Ministry for Economic Affairs and Energy, is evaluating the effects of these COVID-19 economic support measures. The project is divided into two parts. While the first part examines existing analyses on the effects of emergency aid at the firm level and the overall macroeconomic impact of the support programmes, a second ongoing part uses detailed microdata to analyse the causal effects of further programmes such as bridging aid, restart aid, and the November and December aid.

Stabilisation of businesses and the economy
The results from the first part of the project show that the COVID-19 economic support measures made an important contribution to economic stabilisation. They were particularly effective in helping small and very small businesses to overcome liquidity gaps and secure solvency. Consumer-oriented service sectors and retail businesses benefited particularly strongly. In combination with other measures, the programmes also helped to safeguard jobs and support economic recovery after the pandemic.

Prevented business closures
Simulation analyses highlight the impact of the measures: Without government support, significantly more businesses would have had to cease business activities. In total, around 136,000 business closures were prevented in 2020 and 2021. This means that a key goal of the programmes was achieved: the preservation of economically viable businesses in a crisis situation.

Efficient implementation under time pressure
Despite the considerable time pressure, the measures were overall implemented efficiently. Progress in digitalisation and improved coordination between federal and state governments contributed to optimising procedures over time. The programmes were able to reach different target groups and provide targeted support.

Lessons for future crises
The evaluation also identifies areas for improvement. For future crises, the researchers recommend, among other things, the establishment of unified digital platforms, more systematic data collection and the early involvement of relevant stakeholders. The aim is to make government support measures even more transparent, faster and more effective in the future.