Germany grants 1173 Billion EURO to fight economic challenges
The subsidies are based on several programs on federal, regional and local level and include:
- Direct grants for people in need;
- Direct grants for micro enterprises, freelancers and one-person businesses
- Liability waiver (state guarantees) for bank loans to corporations, businesses and freelancers;
- Short-time work allowance;
- Tax reductions.
This program is the biggest aid scheme granted by a government outside the United States of America and is furthermore aligned by several legal provisions to reduce the impact of economic hardship caused by COVID-19, such as:
- Suspension of termination of lease agreements due to non-payment of the lease;
- Suspension of termination of basic services due to non-payment of monthly service fees (i.e. electricity, gas, water, telecommunication, etc.);
- Suspension of repayment of bank loans.
The German Federal Government has adopted a package of measures to help companies cope with the coronavirus crisis. KfW's role within this crisis is to facilitate the short-term supply of liquidity to companies.
For this purpose, KfW will use the existing loan programs for businesses, the self-employed and freelancers and improve the access conditions and terms for these loans. All loans have to be applied through the regular bank or financing partner.
Assumption of risk (liability waivers) for the on-lending financing partners (usually the regular banks) for working capital loans and M&A investments with a volume of lending of up to EUR 1 Billion per corporate group but limited as follows:
- 25% of turn-over 2019, or;
- 2x labor costs 2019 or;
- Need of liquidity for next 18 months (or 12 months for big corporations).
The assumption of risk is 80% for big corporations and 90% for medium and small corporations. Government has announced the intention to increase the assumption of risk (liability waiver) to 100%.
Duration of the loans is 5 years, whereby the first year no repayment is due.
To support micro-enterprises, freelancers and one-person businesses who have taken an economic hit from the coronavirus pandemic, the German government has put together an emergency assistance program worth 50 billion euros. The package comprises the following measures:
- Businesses with up to five (full-time equivalent) employees can apply for a one-off payment up to 9,000 Euros for a period of three months.
- Businesses with up to ten (full-time equivalent) employees can apply for a one-off payment up to 15,000 Euros for a period of three months.
- Where landlords lower rent by a minimum of 20 per cent, any remaining funds from the one-off payment can be used for another two months.
With the ordinance, the German government makes use of the authorization laid out in the "Act to enhance the regulations governing short-time work allowance for a limited period as a result of the crisis" (Gesetz zur befristeten krisenbedingten Verbesserung der Regelungen für das Kurzarbeitergeld) in order to make it easier to obtain short-time work allowance. In this way, jobs are to be saved during the coronavirus pandemic and lay-offs avoided.
The following regulations apply retrospectively as of 1st March 2020, to facilitate access to short-time work allowance.
If a company sees orders decline as a result of difficult economic trends, it can announce short-time work, if a minimum of 10 per cent of its workforce could be affected by the lack of work.
The limit has hitherto been 30 per cent of the workforce.
It is to be possible to dispense in full or in part, with the requirement that negative working hour’s balances are established before short-time work allowance can be paid. The current legal situation means that companies that have agreements to deal with fluctuations in workload must also use these to avoid short-time work, meaning that workers’ working hour balances become negative.
In future, contract workers will also be eligible for short-time work allowance. The social insurance contributions that employers must normally pay for their workforce will be fully reimbursed in future by the Federal Employment Agency. This is intended to create an incentive to use short-time work more for further training.
The ordinance makes full use of the authorizations laid out in the "Act to enhance the regulations governing short-time work allowance for a limited period as a result of the crisis" (Gesetz zur befristeten krisenbedingten Verbesserung der Regelungen für das Kurzarbeitergeld).
If you require further information or advice from our team of specialist lawyers, please contact a member of our Client Relations Team by:
- completing the online enquiry form here
- emailing us at firstname.lastname@example.org
- calling us on +44 (0)207 183 9482