The Bundesbank expects a “Significant Setback” to the Economy if Restrictions are Extended

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FILE PHOTO: A worker on a Volkswagen assembly line in Wolfsburg, Germany, April 27, 2020. Swen Pfoertner / Pool via REUTERS

FRANKFURT, Jan 18 (Reuters) – The German economy is managing to stay afloat but could suffer a “significant setback” if coronavirus restrictions are extended again, the Bundesbank said on Monday.

In its fight against a second wave of infections, Germany has adopted increasingly strict measures, such as closing some schools and shops, to restrict mobility and meetings since the fall.

Chancellor Angela Merkel wants “very quick measures” to counter the spread of the new variants of COVID-19 and has moved a meeting with regional leaders to this week to discuss tougher restrictions. The central bank said the economy should be able to hold out with the current restrictions, but could back down if measures are extended or strengthened.

“If infections are not significantly reduced and the current restrictions on economic activity persist or are even tightened, there could be a significant setback,” the Bundesbank said in its monthly report.

Health Minister Jens Spahn has already said that Germany will not be able to lift all restrictions in early February.

The Bundesbank said the economy likely stalled but did not contract in the final three months of 2020, as the rebound in industry and construction offset the decline in hospitality and retail.

(Information by Francesco Canepa; Editing by Nick Macfie; translated by Tomás Cobos)

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