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June 27, 2020

Economists from major German financial institutions expect unemployment in Germany to continue rising due to the crisis caused by the coronavirus pandemic.

"The number of unemployed is likely to continue to increase in the coming months as there will be more layoffs and companies will hire fewer people," said Fritzi Köhler-Geib, chief economist at KfW state development bank.

Lay off or go bankrupt
"In the coming months it will be important to ensure that unemployment does not take root and does not lead to permanent disadvantages," he stressed, noting that this mainly affects young people without vocational training. Köhler-Geib stressed that in times of pandemics, staff training becomes a challenge because of economic problems, but also because of the practical needs deriving from the social estrangement imposed to control the infection. Katharina Utermöhl, an economist at the insurance company Allianz, also estimates that unemployment will rise. "Many companies will have no choice but to adjust their skills, that is to cut jobs or even go bankrupt, so that about one in five employees who currently work part-time in Germany still has a greater risk of become unemployed, "he noted.

The number of insolvencies in Germany will increase by 12% by the end of 2021
According to Allianz calculations, the number of insolvencies in Germany will increase by 12% by the end of 2021 compared to the end of 2019, mainly due to the crisis triggered by the pandemic . Utermöhl expects a wave of insolvencies to start later this year, when the suspension of the insolvency obligation will end in the fourth quarter. "Even if we manage to avoid bankruptcies, the capacity will still be reduced," he added, proposing to grant aid for the recruitment of new staff and cited as an example the recruitment premium implemented in Austria.

Nor does Deutsche Bank's Marc Schattenberg see any reason to relax, despite improvements in the economic outlook, and said that economic production is still expected to drop by nine percent by 2020. Schattenberg argued that export-oriented sectors, like mechanical engineering and the automotive industry, they are still in trouble and that while the economy is already functioning again in Asia, questions and doubts have not diminished in the United States, for example. The economist estimates that in June there will be nearly three million unemployed in Germany, which means an increase of around 180,000 people out of work compared to the previous month, and that the number of part-time employees would have reached around eight million by the end of May. This figure is slightly higher than Allianz's forecast of 2.869 million unemployed, which would represent the country's highest unemployment level since 2013.