Germany braces for surge in demand for state aid

By AFP

July 15, 2010 Updated Jun 15, 2009 at 4:01 AM CDT

Germany's economy minister expects a surge in requests for state aid after Berlin bailed out the automaker Opel, but he warned in a press interview 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 (160 billion dollars) to help distressed companies has drawn requests from more than 1,300 companies, who have sought credits or loan guarantees worth nearly five billion euros, he said.

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

After committing 1.5 billion euros to a plan aimed at saving Opel, which Chancellor Angela Merkel stressed 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 depend on solutions being sought with rival retailer Metro, while jobs at Thomas Cook are not under threat.

With politicians on the left criticising the minister's actions, Guttenberg warned in the interview against a "politisation" of the business support fund and its "electoral instrumentalisation."

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

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