State help for Arcandor in doubt

State help for Arcandor in doubt
Photo: DPA
The German government has denied the request of struggling retail and tourism corporation Arcandor for a financial boost of €650 million, daily Handelsblatt reported on Tuesday.

“The government cannot bail out or extend credit to every company,” Volker Kauder, head of the parliamentary group of one of Germany’s ruling parties, the Christian Democrat Union, told the paper. “State money can only be offered to companies who are in temporary financial difficulties as a result of the financial crisis and who have a viable business model,” he said.

In the CDU’s eyes, Arcandor does not fulfill these criteria.

Arcandor, which runs household names like the Karstadt department stores and Thomas Cook travel agency, employs 86,000 people and is on the verge of bankruptcy. Extensive lay-offs have been threatened, prompting the public workers’ union Verdi to call on the government to provide the €650 million necessary to save the company.

Though time is running short, Handelsblatt reported that an official application for the bailout has not yet been issued.

Kauder is not the only leading politician to express scepticism on Arcandor’s eligibility for state help.

“State help is not something to be dealt with lightly in a couple of days,” Economy Minister Karl-Theodor zu Guttenberg said on Monday.

The German government is likely to face more difficult decisions of this kind in the coming weeks and months, as an increasing number of German companies apply for protection from the financial crisis. Even some of the leading lights of German industry like Porsche and BMW have reportedly asked for information on the criteria necessary for state help.

The plight of Arcandor represents an opportunity for Eckhard Cordes, head of rival company Metro. Cordes is hoping to merge the Karstadt department stores with Metro’s retail division Kaufhof to create the Deutsche Warenhaus AG. This would open the door to private takeovers of various divisions of Arcandor by different companies without state money.

Cordes intends to present his plan to Economy Minister Guttenberg on Tuesday, Handelsblatt reported.

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