Global Trade Alert

On 27 July 2009, Germany notified the EC about a scheme to facilitate the refinancing of export credits. Due to the financial crisis bank costs of financing have substantially increased and banks have become very cautious in providing credits over longer periods and in large volumes (par. 2, letter from the EC to Germany, Brussels 15.9.2009)
 
Germany plans to buy the export loans from export finance banks. This purchase will be performed by the KfW bank, a state owned bank. (par. 4) Banks that want to participate in the scheme will have to commit to grant new export loans for companies in Germany. Furthermore, only export loans which are subject to state guarantees (so called 'Hermes cover') are eligible for the purchase scheme. (par. 5)
 
The total volume of the measure is estimated to be EUR 1.5 billion per year.
 
The exact eligiablity criteria are: (par. 9)
 

• loans are granted by the benefiting bank directly to the foreign customer or to another bank in the country of the foreign customer
• loans are 100% guaranteed by State export credit guarantees
• loans have to be fully paid out at the time of sale
• contractual currency is EUR or USD
• maximum loan amount is 250 EUR million
• minimum residual maturity of 3 years

 
 
The EC finds that: 'KfW will purchase existing export loans of the banks which can not, or only under very unfavorable terms, refinance their portfolio of existing export credit loans' (par. 17)
 
The EC concludes that: 'The measure distorts competition by favoring these banks. It affects trade between Member States since several foreign banks are operating on the German market and several German banks are operating in other Member States.' (par. 19)
The EC argues that three groups benefit from the scheme: a) participating banks and b) foreign purchasers and c) German exporters.(par. 21)
 
The list of affected sectors is based on the top10 secotrs for 'Hermes covered' exports (source BMWI)
 
The list of affected countries is based on the banks eligible for 'Hermes covered' export guarantees. (source AGAportal)
 
A state measure in the GTA database is assessed solely in terms of the extent to which its implementation affects the extent of discrimination against foreign commercial interests. On this metric, the state aid proposed here is discriminatory.