GO
Loading...

Germany Plans 1 Billion Euros Aid for Spanish SMEs

Monday, 3 Jun 2013 | 5:44 AM ET
Getty Images

Germany will grant Spanish small and medium-sized companies (SMEs) aid of roughly 1 billion euros ($1.3 billion) as part of a push to combat rising unemployment in southern Europe, a paper from the finance ministry showed.

The ministry said in a draft of the plan obtained by Reuters on Monday that state development bank KfW would provide loans of 800 million euros as part of the program.

KfW would also provide additional funds aimed at boosting the capital structure of Spanish SMEs, which have struggled to obtain credit from banks weakened by the euro zone debt crisis. These funds still need to be approved for Germany's 2014 budget.

(Read More: Spain's Route to Recovery: What's Missing?)

"The bilateral package of measures proposed here is composed of different financial instruments with a total volume of about 1 billion euros," the ministry said in the draft for the budget committee of the Bundestag lower house of parliament.

"These measures are appropriate because overcoming financial and liquidity shortfalls of SMEs in programme countries is crucial for maintaining existing jobs and creating new jobs and training positions."

Germany, blamed by citizens in southern Europe for insisting on spending cuts and structural reforms in exchange for bailouts, is keen to shore up its image as the risk of social and political unrest grows.

EU leaders agreed earlier this year to free up 6 billion euros over a seven-year period to fight youth unemployment and Germany, frustrated with the slow pace of European institutional progress, is pushing for that sum to be deployed rapidly.

(Read More: German Companies Sip From Spain's Jobless Pool)

Youth unemployment has risen above 60 percent in Greece, it stands at more than 50 percent in Spain and at over 40 percent in Portugal.

Uneven Bank Deleveraging in Europe: Pro
Alberto Gallo, head of European macro credit research at RBS, says most banks in Europe have recapitalized, but that smaller, weaker banks in the periphery are still a concern.

The finance ministry said it expected the European Investment Bank, European Investment Fund, Spain's development bank and private investors to contribute to the program and hence multiply the funds available to Spanish SMEs.

The program could serve as a model for other European program countries, especially Portugal, the ministry said.

(Read More: Worst of Spain's Crisis May Be Over, Says Rajoy )

Featured

Contact Europe News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Europe Video

  • Jan Dunning, CEO of St Petersburg-headquartered hypermarket chain Lenta, says the situation in Ukraine has had no impact on the group, as consumer confidence remains unaffected in Russia.

  • Vincent Deluard, European strategist at Ned Davis Research Group, says the strong euro is a problem for the region's companies, especially for the large exporters.

  • European shares closed higher on Thursday as investors brushed aside concerns regarding Ukraine and focused instead on Wall Street earnings and the latest U.S. jobs data.