Parties in Germany's governing coalition worked late into Wednesday night to come up with an aid package to protect employees and companies from the worst economic impacts of the coronavirus pandemic.

In a document released early Thursday morning following several hours of "intense" negotiation, the heads of the CDU, CSU and SPD agreed to increase short-term benefits for furloughed workers, extend the duration of unemployment pay-outs, and provide tax relief to suffering industries like catering.

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"The Federal Government must take further measures to cushion social and economic hardships and support recovery," the statement said.

Help for furloughed workers

Due to lockdowns closing off many employment sectors in Germany, low-income workers in catering and hospitality have seen their incomes dry up.

The German Federal Employment Agency provides short-time unemployment benefits when employers are forced to temporarily shorten workers' hours. The short-term scheme is also designed to prevent people from permanently losing their jobs due to "unavoidable" events.

The new short-term aid package will extend and increase the level of support in stages. Workers who have had their hours reduced by at least 50% will receive an increased payment of up to 77% of total net income after the fourth month of receiving benefits. Those still receiving benefits after seven months will receive between 80 and 87%. The current level of compensation is between 60 and 67%.

CDU chief Annegret Kramp-Karrenbauer said that the new measures will ensure affected workers receive a higher rate for a longer period, adding that the coronavirus pandemic has "drastically" changed people's lives.

Tax breaks for restaurants and small businesses

The aid package also includes tax relief for the hard-hit catering industry, with the value added tax lowered from 19% to 7% between July 1, 2020 and June 30, 2021.

Other tax breaks are planned for small and medium-sized businesses to free up liquidity and offset losses.

The aid package comes with a hefty price tag. SPD chief NorbertWalter-Borjans said that the aid will cost in excess of €10 billion. The tax relief for restaurants and bars is expected to cost €5 billion alone over the next year, the DPA news agency reported.

wmr/rc (dpa, AFP, Reuters)

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