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Tue, Jun 16, 2009 - Page 10 News List

Germany braces for state aid requests

SAYING NO After committing 1.5 billion euros to rescue Opel, the German government turned down retail and tourism group Arcandor, which declared insolvency last week

AFP , FRANKFURT, GERMANY, AND BERLIN

Germany’s economy minister said he expected a surge in requests for state aid after Berlin bailed out the automaker Opel, but warned in a press interview yesterday that some companies would go bust.

“I expect a surge in requests for public aid in the weeks and months to come,” Karl-Theodor zu Guttenberg told the business daily Handelsblatt.

Government aid under a special fund worth 115 billion euros (US$160 billion) to help distressed companies has drawn requests from more than 1,300 companies, who have sought credits or loan guarantees worth nearly 5 billion euros, he said.

“Companies will go bankrupt or disappear from the market in this crisis as in previous ones,” the conservative economy minister said. “The state cannot stop this process.”

‘EXCEPTIONAL’

After committing 1.5 billion euros to a plan aimed at saving Opel, which German Chancellor Angela Merkel said was an “exceptional case,” the government turned down retail and tourism group Arcandor, which declared insolvency last week.

The future of more than 40,000 workers at Arcandor, which owns a majority stake in the British travel group Thomas Cook, now depends on solutions being sought with rival retailer Metro.

Jobs at Thomas Cook are not believed to be at risk.

With politicians on the left criticizing the minister’s actions, Guttenberg said in the interview against a “politicization” of the business support fund and its “electoral instrumentalization.”

Germans are scheduled to vote in general elections in late September.

EXAMINATION

EU Industry Commissioner Guenter Verheugen wants a thorough examination of plans to rescue troubled German automaker Opel, which he believes would ultimately benefit Russia, a German daily reported.

“The European Commission cannot allow such a plan to pass automatically, it must examine it from top to bottom,” the German commissioner said in an article in yesterday’s edition of Die Welt.

He said the plan must “truly offer assurances that the business will survive and will be competitive for a length of time.”

Opel was bailed out late last month by a 1.5 billion euro loan from Berlin as well as a promised initial investment of 700 million euros from Canadian auto parts maker Magna, which won the bidding war to take over the struggling firm.

Magna and General Motors, Opel’s parent company which has been bailed out by the US government, have haggled over finalizing their preliminary agreement.

DEAL

Under the proposed deal, GM would keep 35 percent of the company and Opel’s workers would retain 10 percent.

Magna would hold 20 percent, and Russia’s state bank Sberbank, which has joined forces in the deal with troubled Russian car maker GAZ, would have 35 percent.

“So far no investor in the world has come forward to continue the activities of GM Europe without public aid, that [shows] the risk for the business is very high,” Verheugen said.

“The only ones who incur a relatively low risk by participating in General Motors Europe are the Russians,” he said.

“They are going to gain access to more modern technologies and can then build up their own automobile industry, suitable for exports,” he said.

Verheugen said that in the end “the key decisions about the business could not be taken without the approval of the governments in Moscow and Washington.”

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