Germany Ready to Boost Loan Help to Ease Virus Cash Squeeze

(Bloomberg) -- Germany will expand government loans and guarantees if demand and supply disruptions intensify because of the spread of the coronavirus.

While offerings such as bridge loans and credit guarantees are currently sufficient, the authorities are prepared to make more funds available and expand programs if factory closures become more widespread, the economy ministry said on Saturday, a day before the ruling coalition meets to discuss a response to the outbreak.

“We can respond appropriately in any situation,” Economy Minister Peter Altmaier said in an emailed statement. “We are able to increase our support and initiate further measures if necessary.”

The economy ministry proposed a three-step plan to support German companies experiencing financial issues because of the epidemic.

The first step relies on existing financial support, including short-time work programs, to help affected companies. The next phase would involve investment incentives and additional funds.

In the third step, the government could add additional support by resorting to measures approved during the 2008 financial crisis and the 2013 floods, the ministry said, without specifying the plans.

The measures will likely fall short of the sweeping stimulus package craved by many economists and investors.

Chancellor Angela Merkel’s Christian Democratic Union argues that a surge in public spending wouldn’t address the fear factor among consumers and investors and would do little to kick-start demand and investment, people familiar with the discussion have said.

On Sunday evening in Berlin, Merkel will host a meeting with leaders of her CDU, its Bavarian sister party and the Social Democrats to map out a strategy as Europe’s largest economy confronts the potential economic fallout from the virus.

CDU General Secretary Paul Ziemiak cautioned against broad spending plans and reaffirmed the importance of the government’s balanced-budget policy.

“I don’t recommend linking the effects of the corona epidemic directly to stimulus or structural programs,” Ziemiak told the Handelsblatt newspaper. “It’s important that the grand coalition takes targeted and deliberate measures.”

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