The European Commission endorsed Germany’s plans to create a fund of up to € 500 billion to support businesses affected by the COVID-19 pandemic. This measure helps mitigate the economic consequences of the pandemic for Germany.
The statement, in particular, runs as follows:
The European Commission has approved German plans to set up a fund with a budget of up to €500 billion for providing guarantees and investing through debt and equity instruments in enterprises affected by the coronavirus outbreak. The scheme was approved under the State aid Temporary Framework.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “In these difficult times, we continue to work in close cooperation with Member States to find workable solutions to facilitate the access to finance of companies affected by the coronavirus outbreak, in line with EU rules. The German fund aims to unlock €500 billion of liquidity and capital support. The scheme ensures that the State is sufficiently remunerated for the risk taxpayers assume, and, as regards recapitalisation measures, that there are incentives for the State to exit as soon as possible, and that the support comes with adequate conditions, including a ban on dividends, bonus payments as well as further measures to limit distortions of competition.”
The German support measures
Germany notified to the Commission under the Temporary Framework a fund (‘Wirtschaftsstabilisierungsfonds') with a target size of up to €500 billion to provide liquidity and capital support to German enterprises affected by the coronavirus outbreak.
Under the scheme, the support will take the form of (I) guarantees (that are expected to mobilise €400 billion of the total amount), as well as (II) subsidised debt instruments in form of subordinated loans, and (III) recapitalisation instruments (in total up to €100 billion), in particular equity instruments (acquisition of newly issued ordinary and preferred shares or other forms of shareholding) and hybrid capital instruments (namely convertible bonds and silent participations)