State aid in the crisis: Many billions for the large corporations


Status: 01/27/2022 08:03 a.m

The department store group Galeria is just one of many companies receiving state aid during the pandemic. Some economists doubt whether this support can still be justified.

By Lilli-Marie Hiltscher,

Galeria is the latest case of a major corporation being government-backed amid the pandemic. The ailing department store group gets further help. As it says in a letter from Galeria boss Miguel Müllenbach to employees, the department store chain is to be supported by the state with 250 million euros in silent participations. According to the German Finance Agency, 30 million euros will be transferred from last year, 220 million euros net were approved yesterday for new aid.

What is a silent contribution?

In the case of a silent contribution or silent participation, the lender makes liquid funds available and in return receives a share of the company’s profits. However, the entrepreneur does not have to involve the silent investor in management decisions. The financier also does not appear to the outside world as an investor.

The group had already been supported with 460 million euros in economic aid last year. Like the funds recently decided, they are aid payments from the federal government to cushion the economic consequences of Corona. While small and medium-sized companies can apply for bridging aid, large companies such as Galeria receive money from the Economic Stabilization Fund (WSF).

This fund was launched by the federal government at the beginning of the pandemic in March 2020 and is aimed at companies with total assets of more than EUR 43 million, sales of more than EUR 50 million or more than 249 employees. In order to receive state aid from the WSF, large companies must meet two of these three conditions.

Only small part of credits accessed

A total of 250 billion euros in state aid is available for large German companies as part of the WSF to cushion the consequences of the pandemic. Of this, 50 billion euros in credit authorizations are available – of which only around 8.8 billion have been called up so far.

Lufthansa received by far the largest amount in June 2020. The group was hit particularly hard at the beginning of the pandemic, and the aviation industry practically collapsed. As a result, Europe’s largest airline was supported with around six billion euros from the WSF. In November last year, the group repaid the funds in full, and funds not called up were also terminated. The WSF’s shares in Lufthansa are also to be sold by October 2023 at the latest. The fund is currently the airline’s largest single shareholder with 14 percent.

Tourism industry hit hard

The travel groups TUI and FTI were also hit hard by the pandemic and the travel restrictions that followed and received extensive state aid from the WSF. TUI has been supported in two rounds of financing up to January 2021 with a total of 1.2 billion euros, FTI Touristik has received 603 million euros in state aid in three rounds of financing up to October 2021. Smaller companies such as Berge & Meer Touristik and Trendtours Holding received amounts in the tens of millions.

Numerous other retailers such as the shoe retailer Ludwig Görtz, the fashion shop Orsay or the Adler fashion markets were also supported by the state with amounts in the millions. They were particularly hard hit by the lockdown measures at the height of the pandemic. The 2G rules are currently causing problems for brick-and-mortar retail.

“Clear continuation prospects after the pandemic”

Whether a company actually receives this state support in the form of guarantees or direct aid is decided on the basis of four criteria. It is about the “importance of the company for the German economy”, about “the urgency”, about the “impact on the labor market” and about “competition and the principle of the most economical and economical use of the funds of the WFS”.

In concrete terms, this means that the money from the WSF should not be used to finance any companies that can only save themselves from insolvency thanks to this state aid. In addition, the legislature requires a “clear, independent continuation perspective after the pandemic has been overcome” in order to approve the funds. So there must be good prospects that a company can still be successful even after the pandemic.

In the case of the department store group Galeria, some experts doubt that the group could continue to survive without state support. “In the case of Galeria Kaufhof, the question has to be asked whether the previous business concept, which was already in question before the pandemic, is still sustainable after the pandemic,” explains Monika Schnitzer at the request of The Munich economist is a member of the “Economic Wise Men”. The company’s perspective also depends on how long the pandemic will last.

Applications can be submitted until the end of April

Above all, Monika Schnitzer sees a problem in the fact that people could change their consumer behavior permanently. “For example, it can be assumed that many purchases that are currently being made online will remain online after the crisis is over,” says the economist. “It is also conceivable in the travel industry that habits will change as a result of the crisis, especially in the area of ​​business trips and long-distance travel.”

That is why “corporate aid that is based solely on the lost sales without checking the future viability of the business model is all the more problematic the longer the crisis lasts”. The economist fears that the necessary structural change in an industry could be delayed with permanent support.

Applications for guarantees and recapitalization can currently be submitted to the Federal Ministry of Economics and Climate Protection until the end of April this year. It is currently uncertain whether this option will be extended again. “Due to the delivery bottlenecks in the last year, some of which are still ongoing, the further upswing is being delayed, which may necessitate longer aid, even beyond the end of June,” judges Schnitzer.

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