Berlin, Aug 26 (IANS): German Minister of Labor Hubertus Heil defended on Wednesday the extension of the governmental short-time work allowance, which supports companies to hold on to their employees in times of economic difficulties, from 12 to 24 months.

"We are dealing with the deepest economic crisis of our generation," Heil told the German radio broadcaster Deutschlandfunk, adding that the crisis would not suddenly be over at the beginning of next year.

On Tuesday, the government agreed that employers who sign up for short-time work allowance by the end of this year could receive the benefit for a period of 24 months, extending the programme until the end of 2021, Xinhua news agency reported.

Short-time work was the "stable bridge over a deep economic valley," said Heil on Twitter. The measure was certainly very expensive, but mass unemployment would be many times more expensive for the German state.

Because the pandemic still continued but "challenges were changing," the government decided to extend and update its COVID-19 measures, according to a government decree published on Tuesday.

The government also agreed to extend other COVID-19 aid measures for companies and employees. For example, state interim aid for small and medium-sized enterprises (SMEs) would run until the end of 2020 instead of end-August as previously planned.

With the interim aid for SMEs, the government provided subsidies for fixed costs of up to 150,000 euros. In total, around 25 billion euros (29.5 billion US dollars) were already made available, according to the government.

In addition, the suspension of the obligation to file for insolvency would now be extended by three months until the end of 2020.

Despite the economic slump caused by the pandemic, corporate insolvencies in Germany in the first half of the year dropped by 8.2 per cent year-on-year, the credit agency Creditreform said in June.