Berlin’s €100bn ‘economic
shock absorber’ also offers
loans to boost liquidity
The German government has
announced an aid package to support
companies hit by the fallout of the
Ukraine war and the sanctions against
Russia, the leading energy supplier to
the eurozone’s biggest economy.
The measures include a new €100bn
programme of short-term loans from
state-owned KfW development bank
for energy companies struggling to
cover the vastly increased cost of insuring themselves against higher oil and
gas prices.
The package will also provide an estimated €7bn of loans from KfW to boost
liquidity at companies whose operations have been hit by the war and provide further government guarantees for
bank loans to businesses with funding
problems.
The aid package, described by finance
minister Christian Lindner as an “economic shock absorber”, is similar but on
a smaller scale to the one launched by
Berlin to support companies hit by the
coronavirus pandemic in 2020.
German companies have warned of
dire consequences if the war in Ukraine
leads to a severing of energy supplies
from Russia. Some carmakers and steel
producers have already had to close production due to surging energy costs and
shortages of parts made in Ukraine.
The support plan, announced by
Lindner and economy minister Robert
Habeck yesterday, will provide “a timelimited and narrowly defined cost subsidy” for companies whose electricity
costs have at least doubled since last
year.
The ministers said that Berlin was
also planning to inject capital directly
into companies via equity or hybrid
investments, initially through KfW and
subsequently through a separate fund.
They did not say how much it could
invest.
“We will cushion hardship and prevent structural breaks,” said Lindner,
adding that the plan was “precisely targeted” to avoid discouraging the transition away from fossil fuels.
The new €100bn loan facility at KfW
will provide some relief for German
utilities, which have been warning that
energy markets could seize up due
to the heavy cost of insuring against
higher prices through financial derivative markets.
A group representing Europe’s largest
energy traders — including Shell, BP and
big German utilities — made an unsuccessful appeal to central banks last
month for help with extra “margin
calls” required to cover their exposure
to higher energy prices.
Uniper, the German utility, had to
raise €10bn of extra financing this year,
partly from KfW, to avoid a cash crunch
after gas prices surged in the build-up to
Russia’s invasion of Ukraine.
Brussels agreed this week to ban coal
imports from Russia, which provides
70 per cent of the thermal coal imported
by the bloc. However, the ban will only
come into force in August, due to a German demand for more time to adjust to
the new arrangement.
Some EU countries are pushing for
sanctions to be expanded to include a
full embargo on Russian oil and gas
imports, a move resisted so far by Olaf
Scholz, German chancellor, who has
said the country needs two years to
wean itself off Russian hydrocarbons
completely.
Before the war began, half of German
gas and thermal coal imports came from
Russia, which also supplies a third of the
country’s oil imports.