Germany to extend coronavirus furlough scheme to two years

19 August 2020, 18:56 | Updated: 1 September 2020, 9:24

Chancellor Angela Merkel has said she is behind the extension. Picture: PA

By Maddie Goodfellow

Germany is set to extend its coronavirus furlough scheme to two years, with Chancellor Angela Merkel supporting the proposals.

The German furlough scheme, named "kurzarbeit", is currently limited to 12 months.

However, ministers said it made sense to extend it as coronavirus is still curbing business activity and the German economy.

Finance minister Olaf Scholz said on Sunday: "The coronavirus crisis won’t suddenly disappear in the next few weeks.

“Businesses and employees need a clear signal from the government: we’ve got your back for the long haul in this crisis, so that no one is being let go without need.”

A final decision will be made on August 25, but Angela Merkel's spokesperson said she supports it in full.

"Kurzarbeit" currently allows companies to apply for funds if at least ten per cent of their workforce have lost at least ten per cent of working hours.

Companies are estimated to have signed up about 10.1 million workers to the scheme so far.

It comes as the UK's furlough scheme, which pays 80 per cent of furloughed workers' wages up to £2,500 per month, has started to be rolled back.

Then from September, the amount the government pays will drop to 70 per cent of wages up to a cap of £2,187.50, with employers meeting the difference to bring the pay up to 80 per cent of wages.

In October, the government contribution will reduce again, to 60 per cent of wages up to a cap of £1,875 for the hours the employee is on furlough.

Again, companies will need to pay workers so that they receive at least 80 per cent of their normal wage.

At the end of October, the furlough scheme will end completely, chancellor Rishi Sunak has said.

Opposition parties have said the scheme should be extended at the end of October to avoid the mass redundancies feared by some commentators.

Labour's Shadow Chancellor Anneliese Dodds said: “The chancellor’s refusal to abandon his one-size-fits-all withdrawal of furlough is a historic mistake that risks a python-like squeeze on jobs in the worst-hit sectors.

"The reward for months of hard work and sacrifice by the British people cannot be a P45.”