As I write Germany is announcing a new scheme to support small and medium-sized enterprises in that country. The scheme is of staggering scale. In essence they are saying this:
The federal government is putting another comprehensive protective shield for small and medium-sized companies in view of the challenges of the corona crisis. On the basis of the adjusted aid framework (so-called Temporary Framework ) published on April 3, 2020 by the EU Commission , the Federal Government is introducing comprehensive KfW quick loans for SMEs.
The KfW is Germany's state-owned national investment bank, of which (shamefully) there is no UK equivalent.
The loan details are:
Provided that a medium-sized company has shown a profit in 2019 or on average over the past three years, an "instant loan" should be granted with the following key points:
- The quick loan is available to medium-sized companies with more than 10 employees who have been active on the market since at least January 1, 2019.
- The credit volume per company is up to 3 monthly sales in 2019, a maximum of 800,000 euros for companies with more than 50 employees, a maximum of 500,000 euros for companies with up to 50 employees.
- As of December 31, 2019, the company should not have been in trouble and must have an orderly financial position at that time.
- Interest rate of currently 3% with a term of 10 years.
- The bank is exempted from liability by KfW in the amount of 100%, secured by a guarantee from the federal government.
- The loan is approved without any further credit risk assessment by the bank or KfW. This allows the loan to be approved quickly.
The KfW rapid loan can start after approval by the EU Commission.
I gather 'instant' means almost instant: payment is planned in days.
The application is online.
Checking will be via VAT accounts and corporation tax returns, and be rapid.
A more detailed explanation (not online that I can find as yet) is:
We are offering all qualifying companies loans provided through the banking system which will be backed by a Federal guarantee covering 100% of the loan amount through our promotional bank KfW. The loan amount will be three months of a company's revenues, up to a maximum amount of € 800.000 per company. In order to qualify, the only criterion is that the company must have been profitable either in the past year or over the average of the past three years. Also, companies below 10 employees who received direct transfers through our €50bn direct transfer program are not eligible. Revenues and profits can be documented in an easy and objective manner through VAT and corporate account statements. Furthermore, there will be a certification process to eliminate applications by companies in the process of insolvency, restructuring etc. The interest rate on these loans will be 3%, which is significantly higher than the 1% rate for most of the SME loans in our existing KfW programs which have 80 or 90% Federal guarantees. The loans will be repayable with zero prepayment fee at the discretion of borrowers to permit refinancing on more economic terms once the crisis is behind us. The maturity of the loans is up to 10 years, with the option to waive repayment for the first 2 years. This program is foreseen to be available from Thursday April 9 and will be administered through our banking system. Due to the 100% guarantee, banks will not conduct further credit assessments or demand collateral - the idea being to assure fast, direct and uncomplicated access to liquidity in the most flexible manner. Banks may not use the facility to refinance existing debt - this will assure that government guarantees will be directed to the provision of fresh liquidity instead of rolling existing debt.
The cost is substantial:
From a fiscal perspective, this program which we expect to trigger significant demand is covered by the expanded guarantee framework recently approved by the German government and parliament. The amount of our fiscal response therefore remains at the overall amount of € 1,137bn previously communicated, of which € 820bn are guarantees. At the EU level, the close cooperation between European members states and the EU Commission over the past weeks on the Temporary Framework for State Aid measures has been very productive. We thank the EU Commission for the speed and flexibility with which it has acted. We are currently in the process of notifying our measures with the EU Commission and are confident that they meet the state aid requirements formulated in the Temporary Framework.
Of course, not all these loans will go bad: indeed, because they are being provided rapidly and on wide-scale the chance that they will go bad is reduced because the chance of systemic failure is reduced.
There are issues though. First, there will be problems at around the lower cut off.
Second, there appear to be far too few conditions attached e.g. concerning tax paid, accounting conditions, environmental requirements or anything else: that is a massive opportunity missed as far as I am concerned.
Third, startups that have made losses are abandoned by this scheme. It is not a panacea.
But that said it knocks the UK equivalent schemes for six: there is nothing like this here and no mechanism for its supply. We need to be working much harder.
And even so, I still think further support of the type I have recently discussed will be required as the recovery begins. Cool heads will be needed then, but right now Germany is miles ahead of the UK.
And we have a Governor of the Bank of England who is terrified of expanding his balance sheet.
Addition at 15.10: the Bank of England's late, messy and hopelessly indirect scheme will now be available from 15 April, and will still be hard to access. Good luck to all applying for that who now wish they were in Germany.
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Richard the reason why IMO the German support for the SME’s is so much in advance of the UK’s is that in Germany Finance Capitalism has not reached the destructive and corrupting level that it has here. In Germany Industrial Capitalism still exerts a stronger influence. Our loss unfortunately.
Agreed – both German and French industry will be in a much better to position to recover when it happens. Britain will mostly bust, I fear: http://www.progressivepulse.org/brexit/the-economic-recovery-position-is-not-a-walk-in-the-park
Tweeted Peter
Thanks
The government is doing nothing anything like the germans or french are doing. All we are getting from the media is the death toll is lowering and the lock down can end soon. Nothing about secondary infection and certainly nothing about how many people have covid 19 in the population. What the media is doing is nothing but short of being irresponsible and very dangerous. To add to the mix is a Prime Minister in =intensive care. Again the media is playing this down, you do not go to ICU (intensive care unit) for a whiff of oxygen etc. You go there because your life is at serious risk.
The also problem is the public will go nuts if they stay in the house for longer. No exercise, no sun (lack of vitamin D) and nothing to do. Kids, pets and people seeing either other all the time will cause massive social tensions within families. This could mean dealths and a lot people being hurt. To add to this mix a great fear of the DWP and it’s crazy draconian system, a five week wait for benefits — minium and no money in between. Also we are getting reports the police are going overboard with the lock down measures.
So no money, no jobs, house arrest, warm weather coming — expect significant civil unrest. Then you have reports that some companies want their workers to work time gone. Meaning Waitrose want people to work the time they have been paid, even though most of the money is off the government. What it means is Waitrose is trying to pull a fast one on the government and their workers by getting free labour. They want their employees to work 70 hour weeks to recuperate time lost to the company, and thus any money paid.
There would appear to be a change in thinking taking place in the EU and ECB partly as a result of needing to address the economic impact of coronavirus containment but back at the end of last September Mario Draghi was hinting that MMT is being looked at albeit his proviso it hasn’t been “tried and tested.” Clearly the poor economic performance of the Eurozone member countries post the 2008 Great Financial Crash had been causing concern and now they are in a double whammy situation with the coronavirus impact if not triple whammy with Brexit implications also.
https://www.bloomberg.com/news/articles/2019-09-23/draghi-says-ecb-should-examine-new-ideas-like-mmt
When push comes to shove and all that!
Wow! The ECB thinking of MMT!
Nothing is so powerful as an idea whose time has come. There is one thing stronger than all the armies in the world, and that is an idea whose time has come.
Victor Hugo.
From a interesting article on Off-G
https://off-guardian.org/2020/04/06/feudal-japan-edo-and-the-us-empire/
quoting this:
‘This Facebook post by Phil Greaves concisely lays out the differences. The post refers to Britain but it also applies to the US.
China:
Lockdowns in only the most affected areas.
Quarantine and hospital treatment for ALL suspected cases.
Masks provided for everyone, no “two-meter” bullshit.
200 million CPC members & volunteers mobilised to serve the elderly & vulnerable with food and medicine.
ALL wages paid in full for anyone off work due to the virus, for the entire duration.
95% production regained after 4 weeks.
Britain:
Nationwide house-arrest.
Shuts down nearly the entire economy, sacks millions of workers, does not guarantee pay for even half of them.
Gives the banks hundreds of billions.
Massively reduces healthcare capacity.
Allows supermarket chains to exploit panic buyers.
Economic depression inevitable.’
——–
Now Germany and Japan are also moving fast and spending whatever is needed.
But never mind let us all pray for bozo because he is the only obe that can save us! Like he and sunak and tintin man at Health have been doing for months now – NOT.
Our little flame of rebellion is now fully quashed politically, so we get to eat thin gruel and mouldy bread as others do more with the same resources.
[…] I was talking to an MP yesterday about the government’s business support schemes for business, and was comparing them with the German scheme I reviewed here yesterday. […]
Perhaps it would be churlish to remind Germany that in the GFC they looked after their own (banks that had leant to the south of the EU) and prevented any rescue of Greece, Italy or Spain. A little solidarity with those hardest hit, Italy and Spain again, wouldn’t go amiss.
According to Source, Spain is thinking of introducing a UBI. (also in the Independent: https://www.independent.co.uk/news/world/europe/coronavirus-spain-universal-basic-income-europe-a9449336.html)
If you read Tom Brown’s book ‘Tragedy & Challenge’ the reason why Germany has won the peace and the Brits lost is all in there. The pity of it is, is that it was the UK and the USA who helped to organise the post WWII German economy and governance who forgot those lessons and ended up going in another direction.
A tragedy it is.
Mind you, because of the Neo-liberalism in the EU/ECB, Germany just might end up going the same way but take longer to get there. It is a risk.
And the German government are offering this help without demanding 25.1% of a company’s shares, providing them with a list of demands and threatening to flood the companies’ Boards with apparatchik government directors.
Yes, indeed, the German scheme is much more practical, generous and well thought out than yours.
They’ve got that part seriously wrong, I suggest
Well Mr Watson, their scheme is certainly a lot better than the one pursued by the UK government, isn’t it? Where speed is of paramount importance, not demanding too many checks and making the administration of the scheme relatively simple, is what counts.
But then, the German health service is far better prepared than the NHS, as well. Vastly more testing, and 5 times as many ICU beds have meant Germany is recovering from this far more quickly than the UK.
Not surprising though is it? Germany’s been run by Merkel for the last ten years, we’ve been run by useless right wing idiots obsessed with the size of the government deficit, and their ludicrous Brexit.
Why ‘The quick loan is available to medium-sized companies with more than 10 employees’. Surely as in the UK most businesses have less than 10 employees. What is Germany doing for them I wonder?
Grants, paid in days…
Authorities in Germany have so far received 1.1 million applications for “immediate financial help” from self-employed and small businesses,
Kate Connolly reports from Berlin.
One billion euros has already been paid to them and a total of 1.8 billion euros worth of payments has been approved, and is due to be received any day.
Most payments are going to restaurants, hairdressers and cosmetic salons and business consultants, far less to craftspeople and construction workers, who are still able to work as long as they can keep the physical distancing rules.
Self-employed people have turned to social media to express their amazement at how unbureaucratic the access to the funds has been, just days after the measures were passed as emergency legislation in Germany’s parliament, the Bundestag.
Freelancers, self-employed and small companies are eligible for the funds. Those with up to five workers can get a one-off payment of 9,000 euros, for businesses with up to 10 workers, it’s 15,000 euros.The monies do not have to be paid back.
https://www.theguardian.com/world/live/2020/apr/02/coronavirus-live-news-global-cases-latest-updates?page=with:block-5e861bc38f08532a0e666d9a#block-5e861bc38f08532a0e666d9a
Thanks