Top meeting of the federal government on the Lufthansa rescue

ÜA state-of-the-art crisis meeting is scheduled for early next week about state aid for the battered Lufthansa. Chancellor Angela Merkel (CDU), Finance Minister Olaf Scholz (SPD), Minister of Economy Peter Altmaier (CDU), Minister of Transport Andreas Scheuer (CSU) and Lufthansa CEO Carsten Spohr want to negotiate a rescue package. This was reported by the DPA news agency. The “Bild” newspaper had previously reported that such a top meeting was planned shortly.

The bailout package is worth nine to ten billion euros, government circles said. However, there is still controversy in the federal government in what form the federal government is helping Lufthansa and how much say politicians have in the event of a temporary state participation. In government circles it was said that Lufthansa should not be dragged from all sides, the situation was already dramatic enough.

Massively affected

Lufthansa is severely affected by the corona crisis. Spohr has already prepared the airline’s employees for tough times. Lufthansa is not the only airline that needs state aid.

Lufthansa competitor Air France KLM also receives massive public aid in the form of state guarantees and loans of up to 11 billion euros. France and the Netherlands hold shares in the company.

In the case of Lufthansa, the question is also what form the state could take part in. An entry as a shareholder or as a silent partner is conceivable. As the F.A.Z. reported in its Saturday edition, citing industry insiders, that the state rescue package for Lufthansa is already in place. It could be finished in the coming week.


Startups are fighting for a Corona bailout

Hamburg, Berlin The announcement on April 1, of all things, sparked euphoria among start-up lobbyists in Berlin: finance minister Olaf Scholz (SPD) announced a two-billion-euro protective shield especially for emerging tech companies. The efforts to convince the German Startups Association, which was newly formed a few months ago, had obviously borne fruit.

But now the founding lobbyists are worried about the implementation. The association now wants to put pressure on the media again.

“We have just received confirmation that the two billion euros will not be released in the Ministry of Finance. We have therefore already decided to escalate today, to send a letter to Scholz and at the same time to start a small media campaign to increase the pressure, ”says an internal WhatsApp message with which lobbyists will get signatures on Thursday wanted to. The news is available to the Handelsblatt.

Since the beginning of the corona crisis, the start-up association around its boss Christian Miele from venture capitalist Eventures has repeatedly publicly promoted a wide range of help for the industry – including in an online press conference together with the digital representative of the federal government, Thomas Jarzombek (CDU). Now the open letter should increase the pressure.

In the letter to Scholz, the association firstly wants to praise the finance minister for “recognizing the specific needs of startups”. Now the rapid use of the “promised customized instruments is required”.

The letter ends in the appeal: “Keep your word, Minister Scholz! Release the two billion euros! ”Upon request, the association confirmed the existence of the letter, which now has 500 signatories and is expected to be published at the weekend.

“While the other auxiliary instruments have already been focused, there is still no timetable for the start-up measures,” said Christoph Stresing, managing director of the Federal Association of German Startups (BVDS). “Speed ​​is now the order of the day.”

Industry should also take risks

There are obviously good reasons for the hesitant implementation. The federal government is looking for a way to deal with the special situation of the industry. After all, the early-stage investors, who are particularly strong in the German scene, calculate their investments with failure rates of around 80 percent even in normal times. That is why the Federal Ministry of Finance wants to prevent those founders whose business idea is not viable anyway from being supported.

“The topic is complex, because we are talking about support for start-ups about equity financing, which is more likely to default than normal loan financing,” said State Secretary Jörg Kukies on Friday.

So far, the industry has preferred so-called matching. The state should increase funding rounds from venture capitalists. This is how the industry should take risks.

“We want to protect start-ups, not venture capitalists. Therefore, a promotional measure makes sense in which the venture capitalists refill their own money, which is then replenished by the state, ”said the founder of the venture capitalist Lakestar, Klaus Hommels, this week’s Handelsblatt.

However, critics doubt the selfless intentions of venture capitalists. “Why should venture capitalists be the gatekeepers for state aid?” Asks Sven Schmidt, co-founder of Hamburg investor ICS and critic of the industry. Start-ups that are financed without venture capital threaten to be excluded. In addition, the large venture capitalists in particular had earned very well in the past boom years and should not immediately ask for state aid, Schmidt criticizes.

However, the federal government expects the billion dollar umbrella to start soon. “I am confident that we can get the aid on the way quickly. We are in close and constructive exchange with the representatives of the industry to develop a viable concept, “said State Secretary Kukies.

More: Start-up investor Klaus Hommels criticizes state aid for Tui and Adidas


Commission moves on the edge of EU law with EU bonds and grants

NAfter the summit is before the summit. This Brussels bulrush has seldom been as valid as in the times of the Corona crisis. Federal Finance Minister Olaf Scholz (SPD) stressed the approval of the video conference of the heads of state and government on Thursday evening on the 540 billion euro package to cushion the immediate consequences of the crisis, saying that the EU now had sufficient time to find a solution to the problem To develop “reconstruction”. The southern European countries from Spain via France to Italy see it differently. The head of the Eurogroup and Portuguese Minister of Finance Mário Centeno had talked to the F.A.Z. recently said that the EU had only a few weeks. The European Commission is also accelerating.

Hendrik Kafsack

The head of the European Central Bank, Christine Lagarde, warned to hurry. In the worst of three scenarios, the Eurozone’s gross domestic product could shrink by 15 percent this year, Lagarde said, summit participants said. The EU Commission is now to work on behalf of the heads of state and government to come up with a compromise in the dispute over the financing and the volume of the reconstruction fund, which can do without the controversial corona or classic Eurobonds.

After the summit on Thursday evening at the beginning of May, Commission President Ursula von der Leyen announced specific proposals on how the reconstruction fund and the multi-year EU budget 2021 to 2027 could be combined. For the first time, she explicitly mentioned the option to raise the upper limits for national contributions to the EU budget from 1.2 percent to 2 percent.

Total volume of around EUR 2 trillion

The states would no longer have to pay money into the budget. However, the EU could issue bonds to finance the reconstruction fund, which would be secured by the difference between the contributions paid and the ceiling. In other words, if the EU limits the spending of the 2021-2027 budget to about 1.1 percent of economic output as discussed, there remains a gap of 0.9 percent up to the ceiling for the national contributions that the European Commission uses to hedge its bonds could. The EU states would only have to “deposit cash” if the bond could not be serviced. The EU has calculated that the EU could raise 320 billion euros within the first three years of the 2021-2027 budget. But it shouldn’t stop there. Finally, some Member States are demanding aid of up to 1.5 trillion euros.

The European Commission is targeting a total volume of around 2 trillion euros. To put it simply, the 320 billion euros raised on the financial markets are to be “enriched” with money from the EU budget, national special contributions and private funds. For this purpose, the money is to be “leveraged” as it was with the Juncker fund: the EU would assume the main risk of projects and thus make them attractive to other investors. The 2 trillion euros come from an internal paper that has been circulating in Brussels since Wednesday and also the F.A.Z. since then.

The status of the paper is not entirely clear. A spokesman for the Leyens has denied that she knows the paper herself. However, trustworthy sources within the authority confirm that it was very well informed about the content. Until the final proposals are presented in early May, some details are likely to change. Nevertheless, the paper is instructive because it gives an insight into the options the Commission is considering to promote reconstruction.

Other reconstruction tools

This applies not least to the crucial question in addition to the financing and the amount of the fund, whether the fund only grants loans or non-repayable grants, as the Southern Europeans demand. The European Commission is therefore considering only passing on around half of the 320 billion as loans to EU countries such as Italy. The other half should flow directly into the EU budget. This would then, as is customary with the EU budget, give grants. These 160 billion euros should only be repaid after 2027 – either through EU contributions paid in by the member states or new own resources, in other words, EU taxes. The approach is delicate because it can be interpreted as EU debt, which the Community is prohibited by the EU treaties. There are therefore doubts within the Commission as to whether the Federal Constitutional Court would accept this.

For this reason, the EU Commission is probably also using other instruments in parallel to finance the reconstruction. The new euro zone budget, which the finance ministers have just approved, should also play a role. It is also expected to increase from just under EUR 20 billion to EUR 200 billion through additional national contributions, and then support the Member States in their reconstruction plans from January 1 of next year.

The Commission also plans to bring money from structural support programs 2021 to 2027 forward and focus on the first two years of the financial period to promote labor markets, SMEs and the health sector. The paper mentions a total of 50 billion euros. Because the EU Commission also includes the national own contributions required by EU law, 150 billion euros will be generated from this – as is generally the case in some of the paper “beautifully and extrapolated”, as critical Brussels voices say.


False incentives, fraud, debt: the side effects of the corona crisis

The Chancellor is in top form in times of corona crisis. Angela Merkel explains complicated population doubling rates and reproductive numbers. But she also knows everyday things. “They have to be washed or ironed regularly, put in the oven or in the microwave,” Merkel explains how to care for respiratory masks. “Even if that sounds a bit housewife, so to speak.”

The omniscient state – embodied in the chancellor. The subjects are explained life down to the smallest detail. With this self-image, Merkel takes “measures that have never existed in our country before”. Fundamental rights are restricted, the economy is pushed to the brink and then supported with unprecedented aid.

One of Merkel’s closest confidants, Peter Altmaier, is more than enthusiastic. “An uncle who brings something is better than an aunt who plays the piano”, the Federal Minister of Economics remembers of his childhood.

And what is brought along! If you add up everything the federal government now wants to offer to combat the corona crisis, you get a gigantic sum of at least 1.2 trillion euros. No other country in the world has raised so much money in relation to its economic strength.

Germany has a full 35 percent, far more than the EU average or the USA. Federal finance minister Olaf Scholz did not understate what he promised a few weeks ago: “It is not spilled, but padding.”


The increase in importance and power is unique. Never in the history of the Federal Republic has a government intervened so quickly and deeply in public life and thus in the economy. After the financial crisis, German government debt rose by 315 billion euros in one year. The value of the federal, state and local governments will be far exceeded in this crisis. “I am worried whether we will be able to return to normal economic policy,” says Lars Feld, Germany’s top economy.

The measures to protect health are understandable. But the question increasingly arises: what side effects do the multi-billion dollar rescue programs have? The free market is disturbed, competition is distorted, prices lose their signal strength.

“As much market as possible, as much state as necessary”, the famous words of former Federal Minister of Economics Karl Schiller lose their meaning every day.

There is a risk of higher prices, inefficient companies and loss of wealth. It is significant that more and more companies are turning to the Bundeskartellamt during the corona crisis in order to be exempted from cooperating with competitors. The new spirit of state economy speaks.

Spend as much as you can. The year 2020 will be disastrous. Kristalina Georgiewa (IMF chief)

Certainly, help for companies with no fault of their own must be provided. But with the flood of support funds, the risk of misallocation is high. Capital and labor are tied up in companies with below-average productivity, less investment and innovative strength.

A few weeks ago, after a parliamentary request from the FDP for possible support from zombie companies, the Federal Ministry of Finance had to admit that “necessary market processes of creative destruction are hindered”.

The concern is justified that the state is eating itself too deeply into the economy, throwing privacy and data protection partially overboard and that the influence on the market will not be reversed after the end of the crisis.

A look at history suggests little good. The federal government is still 25 years after the IPO Deutsche Telekom still the largest single shareholder.

Fundamentally, there is a problem that is known in the economy as moral hazard: companies and citizens behave irresponsibly or carelessly due to existing false incentives. The news of fraudsters sneaking up subsidies is increasing.

“The state is a lousy entrepreneur”

The appearances of Altmaier and Scholz are characterized by superlatives. At the federal press conference, they will be presenting the rescue packages worth billions to the public with great regularity. “This is the most comprehensive and effective guarantee that there has ever been in a crisis,” said Altmaier in mid-March. “This is the bazooka, we’ll look for small arms later,” the Federal Minister of Finance said at the appearance.

The small arms that have now been added are quite large-caliber. Scholz announced a debt-financed supplementary budget of 156 billion euros. This includes an emergency fund with a volume of 50 billion euros, which is aimed at the self-employed and small businesses with up to ten employees.

The federal guarantee for the state bank KfW is increased by up to 450 billion euros. And then there is an Economic Stabilization Fund (WSF) with a volume of 600 billion euros. The majority is earmarked for government guarantees to keep companies liquid.

100 billion euros are reserved for possible investments, i.e. partial nationalization of companies. The battered Lufthansa is already holding talks about state participation.

You can still hear Altmaier’s words: “The state is a lousy entrepreneur.” The Federal Minister of Economics at least dedicated the most beautiful hall in the ministry to Ludwig Erhard. But he is currently just as far away from Erhard’s mantra as the Germans are from summer leaves in Mallorca.

Minister of Economics Peter Altmaier (standing) and Minister of Finance Olaf Scholz (front)

The father of the “German economic miracle” throbbed to measure, he remembered sentences, the state should not be a player, but an arbitrator in the economy. Now the state is preparing to take over the entire football club.

No other industrial country is helping its economy with such large sums as the Federal Republic. This shows a new evaluation by the International Monetary Fund (IMF). He does not criticize Germany, on the contrary. “Spend as much as you can,” advises IMF chief Kristalina Georgiewa. The economic situation is too depressing.

The Council of Experts is now assuming that the economy will decline by more than 5.5 percent this year. This is the case that was previously treated as a worst-case scenario. The economic downturn would be worse than in the global financial crisis. 725,000 companies have registered financial difficulties and short-time work.

Including: hospitals. Health Minister Jens Spahn ordered them at the beginning of March to postpone all planned operations. For the hospital operator, this means severe revenue losses. More than a third of the intensive care beds are not occupied. With the Hospital Relief Act, the federal government created a regulation to compensate the clinics for the failures. But that’s far from enough.

This is the bazooka, we’ll look at small arms later. Olaf Scholz (Federal Minister of Finance)

Some private organizations have registered short-time work, including the Schön-Klinik group. The head of the German Hospital Society, Gerald Gaß, sees the time for a “careful, gradual resumption of regular care”.

Spahn also said last week that clinics could “gradually return to normal”. “We do not want to keep 40 percent of the intensive care ventilation beds in Germany permanently”, said the minister.

The pressure on the companies is huge, the need for help is great. This year alone, the federal government is raising 156 billion euros in new debt. The federal states are also preparing an extensive flood of money for pumps.

According to a survey by the Handelsblatt newspaper among the 16 state finance ministries, they are currently planning 65 billion euros in new debt to fight the crisis. In addition to the federal government’s huge € 1.2 trillion rescue package, the federal states are also helping their companies and the self-employed. Bavaria alone has launched a fund with 60 billion euros.

The IMF chief not only welcomes the gigantic aid package in Germany, the monetary fund also calls for thorough control. “Keep the bills,” said Georgiewa. Transparency and accountability should not be put off in the face of the crisis. Whether Germany is world champion in this discipline, doubts are increasing.

Risk zombie company

The financial crisis shaped a saying by the former head of central bank in Europe, Mario Draghi: “What ever it takes”. In this crisis, it becomes a “Whatever, take it!” Aid is mostly spent without checking, the money cannot be distributed quickly enough.

According to an overview by the Ministry of Finance and the Ministry of Economics, over 26 billion euros were applied for by KfW Hilfen. Almost 13,000 of the more than 13,200 applications were approved. In other words, almost anyone who wants help gets it, most likely companies that didn’t have a working business model before the pandemic.

This easily creates zombie companies that are only alive because of generous state aid. After all: With the large sums, the KfW steering committee seems to be examining it more closely. So far, around 8.5 billion euros have been approved. So it takes a little longer for the large-volume applications.

In contrast, the self-employed and small businesses with up to ten employees are suspiciously fast. So far, according to the overview of 1.65 million applications, around 1.1 million have been approved and more than nine billion euros paid out. These are not loans, but aid that does not have to be repaid.

“Speed ​​and thoroughness go hand in hand: it is carefully checked who receives the money,” Finance Minister Scholz promised. But is that true? North Rhine-Westphalia and Berlin were even recently forced to suspend immediate payments because large-scale fraudsters wanted to get to the pots.

There are also problems with honest entrepreneurs. In North Rhine-Westphalia, for example, the self-employed and small businesses are always granted the maximum amounts of EUR 9,000 and EUR 15,000 – regardless of need. This practice is not well understood in the Federal Ministry of Economics. Because a flat-rate payment of maximum amounts was actually not intended.

The aid should amount to up to 9,000 euros for companies with up to five employees and up to 15,000 euros for up to ten employees. The emphasis here is on the “up to”. According to the Ministry of Economic Affairs, the actual amount should be based on sales and operating expenses for the next three months. An entrepreneur with zero euros turnover and 1000 euros costs would be entitled to 3000 euros in emergency aid.

But these details were lost somewhere in the confusion between the federal states and the federal states. The up to 50 billion euros are provided by the federal government. Although federal money is at stake, it is up to the federal states how much they scrutinize companies. In Hamburg, for example, a liquidity check is required. Other countries are significantly less strict so that aid can flow as quickly as possible.

In Berlin, more than a billion euros were paid out to solo and small entrepreneurs within days. And the Berlin Senate also admits behind the scenes that surely there are also deadweight effects. Since no examination was carried out, almost everyone received 14,000 euros in a combination of federal and state funds. These include the self-employed, who normally have annual sales that are significantly lower, they say.

Some recipients are now voluntarily repaying the aid for fear of sanctions. But whether a subsequent thorough examination is possible to convince fraudsters is skeptical in financial management.

Dangerous false incentives

The economic nonsense, which is operated partly in the name of Corona, is great. Governments in the federal and state governments are increasingly creating the illusion that they can regulate everything with state trillions. And more and more, government intervention and expansion is creating false incentives in all areas of the economy, which can be revenged bitterly.

Take the housing market as an example: the Federal Minister of Justice, a woman from the SPD, wanted to protect the tenants. The result is a half-baked law that gets small landlords into trouble. The law was so badly made that solvent companies like Adidas or Deichmann used the gaps and simply suspended the rent payments. Only after a storm of indignation did Adidas row back.

Take the example of KfW loans: After the institutes hesitated to pass on the subsidized loans from the Staatsbank KfW to companies because they still had to bear ten percent of the default risk, the state assumed full liability. With the danger that house banks will now be able to provide loans to companies that have long been bankrupt.

The banks don’t care, they are released from any liability, but of course they still make good money from their business. The fool is the taxpayer who has to answer for the defaults.

Example of short-time work: Short-time work allowance is a tried and tested crisis instrument. The state replaces up to 67 percent of net wages. However, the SPD was not enough. In the coalition committee on Wednesday, she pushed for an increase to 80 percent.

It is the most comprehensive and effective guarantee that there has ever been in a crisis. Peter Altmaier (Federal Minister of Economics)

However, a general increase would have significant deadweight effects: Many companies are already increasing short-time benefits from their own resources. Apart from that, the short-time work allowance is not meant to secure the standard of living, but rather to ensure the survival of companies and thus avoid unemployment.

In other areas, the federal corona strategy is rather arbitrary. The craft complained that the vehicle registration offices were closed. There is also much discussion about opening shops up to the limit of 800 square meters. This border was communicated at least improperly and caused confusion and indignation among the shopkeepers.

Now a Hamburg administrative court has declared the 800 square meter rule to be illegal. The court could not understand why opening larger sales areas alone should attract more people to the city center. Necessary infection protection measures could be followed at least as well in larger stores as in smaller facilities.

Whimsical and impractical was initially the requirement that repair shops were allowed to remain open, but the sales rooms had to be closed. Many craftsmen wondered if they could lead the customers through the sales room into the workshop. Another detail from this series of undesirable side effects of the rescue policy.

The border closures, for example with the Czech Republic, mean that the bricklayers are missing in the construction industry and the harvest workers in agriculture from Romania. The state decides a lot, but the consequences are borne by the entrepreneurs and their employees.

The argument for the state’s rapid generosity in the crisis is: rather spend more now to prevent the economy from crashing and millions of jobs be lost than have to finance mass unemployment for a long time. This approach is absolutely correct. But it also remains true: somehow the state rescue billions have to be financed at least in the medium term if the next generations are not to be overwhelmed.

Currently this is done through the use of reserves and debts. Germany certainly has scope. The Federal Republic had just pushed the debt level to below 60 percent, thereby meeting the Maastricht criteria for the first time in many years in 2019. But that will be the last time for a long time.

As a result of the corona crisis, the federal government expects a general government deficit of 7.25 percent of gross domestic product (GDP) this year. The debt ratio as a share of all debts in GDP is estimated at 75.25 percent, as can be seen from the German Stability Program 2020.

“The projection is currently subject to very high levels of uncertainty,” says the current report. In other words, the debt level could be even higher. This mainly depends on how high the losses are that the federal government will incur from its guarantees and sureties.

Given the huge commitments, some in the grand coalition are trying to put the brakes on. “I don’t like the fact that we almost always get new suggestions every hour, what else can you do,” said Union leader Ralph Brinkhaus. “All of this must also be paid for.”

In a crisis, the state’s money is loose. Some sense their chance to finally implement long-held plans.


Even the biggest bazooka run out of ammunition

Finance Minister Olaf Scholz

Someone has to pay back the money spent on coping with the corona crisis.

(Photo: Reuters)

The grand coalition wants to mitigate the massive consequences of the corona crisis with new aid worth billions for workers, companies, restaurants and schools. Short-time work benefits are to be increased in order to compensate for loss of income, especially for low-wage earners. At the same time, the duration of the unemployment benefit is extended. The restaurants that are particularly hard hit by the crisis are getting tax relief.

The new aid package is expected to cost around 10 billion euros. Just as every single measure is justified, a bad feeling is creeping in now whether the state can really finance a solution for everything and everyone. Even the biggest bazooka run out of ammunition. Perhaps soon there will be more voices trying to put a brake on costs.

Someone has to pay the money back once. Future generations will still have to bear these loads. Chancellor Angela Merkel should say something about this in her government statement this Thursday, as well as the trillion-dollar rescue plans at the summit in Brussels, which is also due this Thursday.

Germany will have to grow out of the crisis for many years. This requires a thriving economy and many workers who work diligently. The alternative would be to devalue money. Nobody wants that either.

More: “Deadly for acceptance” – Minister of Health Spahn opts for controversial Corona app model


Corona: Banks want looser rules for state aid – economy

The EU Commission could exploit the legal leeway very flexibly to hold taxpayers liable again in an emergency.

It is becoming apparent that the great promise made by the governments from the financial crisis that they will never again bank banks clinging to taxpayers’ money could not be kept in the corona crisis. According to the Süddeutsche Zeitung Individual financial institutions, but also governments, are urging to loosen the strict conditions for government aid as a precautionary measure and at the same time to soften the directive on winding down clumsy banks.

If they were successful with this, taxpayers would have to assume the losses from banking business again. As early as March, when the corona virus was spreading almost unchecked in Europe, the EU Commission had announced that it was examining “whether it will be necessary to make the rules for state financial injections more flexible for banks”. This test is reported to be in full swing. In essence, the EU state aid law should serve as a door opener, where the EU Commission has great discretion.

“Under no circumstances should there be a blank check for state aid to the banks, nor does the state aid law give it away at all,” says Sven Giegold, MEP of the Greens. It cannot be ruled out that in the event of a worsening of the corona crisis, a state would also have to help banks in individual cases. “But that always has to be checked specifically.” Banks in Italy and Greece in particular are considered to be extremely vulnerable to crises. To this day, their balance sheets contain bad loans in the billions, which date back to before the financial crisis. Most recently, the ECB therefore discussed the establishment of a bad bank where these contaminated sites could be disposed of.

Further government aid to banks would break the political promise of the 2008/2009 financial crisis. In Germany, the rescue of German banks at the time has cost taxpayers around 68 billion euros. This includes sufficient guarantees, loans and capital injections. Chancellor Angela Merkel (CDU) had promised at the time that it should never repeat that losses from banking transactions had to be socialized. On request, the European Commission and the federal government announced on Wednesday that they were opposed to a change in the rules that had been adopted at the time for the resolution of tight banks.

“The Federal Ministry of Finance is strictly against the softening of the directive,” said a spokesman for Federal Minister of Finance Olaf Scholz (SPD). The European Commission also said that it had “no intention” of touching the rules on bank resolution. The banks are in much better shape today than they were then and have “sufficient liquidity buffers,” said a spokesman for the authority. Nevertheless, he conceded that the corona crisis could hit the banks “indirectly”.

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In Germany, too, there are fears that the foreseeable wave of bankruptcies among companies, but also the failure of home loans, could put many banks in trouble in the medium term. The concerns of the banks about large-scale loan defaults go so far that the financial institutions had refused to take on only a small part of the default liability for certain companies in the state-secured KfW loans. The state stepped in because they refused. In these cases, German taxpayers are now fully liable if house banks pass on loans from the KfW state development bank to their customers. It is piquant that the house banks collect three percent interest from the needy companies that want to save themselves from bankruptcy with the quick loans.

At the same time, the federal, state and local governments are busy supporting domestic banks. It was only in 2019 that the Federal Ministry of Finance encouraged Deutsche Bank and Commerzbank to consider a merger. Both banks had tried for years to develop a viable business model. The balance of the financial crisis is “devastating”, according to the board of the “Citizens Movement Financial Turn”, Gerhard Schick. It is now visible how much the citizens were burdened. “A family of four paid more than 3000 euros for the bankrupt banks.”

Coronavirus: Your opinion on the loosening:Readers’ discussion


Criticism of the Libra restart is growing

Frankfurt / Denver It was a nice plan. The Libra Association wanted to go into spring with a new, modified concept paper. “Our mission is a simple global payment system that supports billions of people”, in short: building a “more inclusive and innovative financial world”. That was the announcement a few days ago. The Internet giant should do this by the end of 2020 Facebook start the initiated project.

Global, innovative and for the benefit of mankind: Libra’s new concept paper, the “Whitepaper 2.0”, is bristling with pathos in the best Silicon Valley manner. And yet it represents a kind of peace offer by the Libra partners, along with Facebook includes the travel agent Over and the streaming service Spotify to. The pledge is that your planned private currency will be created on the basis of a “collaborative dialogue” with all relevant actors.

The message has been heard around the world. Alone, the recording could have been more cordial. Despite all the modifications, US observers fear “a parallel world to the existing financial service providers”. German politicians warn of a “powerful shadow bank” under Facebook curate. And the advance is also viewed critically by scientists.

The question of whether the Libra launch will succeed on the second attempt or whether global resistance will finally bring the project down is completely open. It is even possible that the partners have made new enemies with the latest modifications. However, giving up is not an option for Facebook. The competition is already in the starting blocks.

Libra board praises new approach

“We still have work to do. But we are in a much better position than last year, ”explains the Libra Association’s operational board, Bertrand Perez, in an interview with the Handelsblatt. “We now have a strong answer to many questions and concerns of the supervisors.” And indeed: The makers have approached their critics, at least in part.

Prevention of abuse has been strengthened. “The Libra network will work better than the traditional financial system” in preventing money laundering, terrorist financing or hacking, Perez promises. For this, the network based on the decentralized blockchain database technology will start as a closed system. Further actors are only to be added later.

“We don’t reinvent the wheel for its own sake,” said Perez. “Our goal is to simplify global transactions. Access to the Internet is a basic raw material for everyone today. It is not yet to receive and send money. We’re working on it.”

Above all, one change is to make Libra’s approval by the supervisors easier: The controversial basket of collateral, which was supposed to form the basis for the Libra coin, has been deleted.

Instead, national currencies should now be digitized step by step in a one-to-one ratio. “In addition to the Libra coin, which is based on a basket of currencies and government bonds, we want to offer stable-value coins for individual currencies,” explains Perez, “for example a Libra euro or Libra dollar.”

Libra is no longer a risk to state sovereignty. “We don’t create new currencies,” says Perez. “Behind every Libra dollar that circulates is a real dollar as security.” Perez does not want to say goodbye entirely to the idea of ​​the art coin based on a currency basket: Such a “multi-currency coin” could allow transfers to those countries, in which Libra has not yet digitized the national currency.

The Libra Association, based in Geneva, has already submitted its first application for state approval – to the Swiss financial regulator Finma. It wants to analyze the application openly and emphasizes that it is in close contact with more than 20 supervisory authorities and national banks worldwide. The calculators could do the trick: Libra would start flexibly where there is little political resistance – without immediately spoiling a large number of states.

Criticism from the USA and Germany

It is rather unlikely that the Libra dollar will start. Again, there is loud criticism of the project from the USA: “There are still too many questions unanswered why Facebook is developing a cryptocurrency and how it will influence the global economy and consumers,” said the democratic financial expert in the House of Representatives, Sylvia Garcia.

In an open letter to the parliament, the Americans for Financial Reform think tank called for stricter laws for payment services that operate outside of the regulated big banks. Otherwise Facebook could build “a parallel world to the existing financial service providers”.

As part of the Libra Association, the group would build the infrastructure on the one hand, and on the other hand store the coins in digital wallets – and thus get too much power with its more than two billion users. The example of Tencent from China has shown how much influence companies have on pricing that connect payment services with social networks.

Criticism is also growing in Germany. Federal Finance Minister Olaf Scholz (SPD) told the Handelsblatt: “We will not allow a private global currency. The currency monopoly must remain in the hands of the states. ”

Scholz is currently examining the extent to which the new Libra plan takes into account the previous concerns of the EU states, which they had formulated in a joint declaration on December 5. According to the Federal Ministry of Finance, the assessment also depends on the specific design of the business model. This leaves the new concept paper open.

Gerhard Schick, head of the citizens’ movement Finanzwende, warns that some have declared Libra dead too soon. “Anyone who knows Facebook knows that this company won’t let up on something like that so quickly,” believes Schick.

“If Libra prevails, this will go hand in hand with an increase in data and power for Facebook, although the company is already too powerful today. In our view, central problems remain, which is why we continue to reject the project. ”

Thomas Heilmann, blockchain expert of the CDU / CSU parliamentary group and one of the fathers of the blockchain strategy of the grand coalition, fears a monopolization of digital money and thus a threat to financial stability – for example, if Libra also prevails as a technical standard for stablecoins that are deposited with national currencies.

However, Heilmann does not believe “that we can prevent private stablecoins such as Facebook’s Libra in the long run.” If necessary, the group would simply buy a European bank and meet all requirements.

Danyal Bayaz, financial expert of the Greens parliamentary group, is particularly disturbed by the unclear data protection in the new Libra concept. The makers have responded to some criticism: “However, this does not clear up the core criticism. Nobody can guarantee that Facebook will not use Libra’s data after all, ”said Bayaz. The state’s monopoly on money creation would also continue to be questioned.

The private banking association BdB is afraid of overpowering competition: “If the new proposals were implemented, the balance of power among payment service providers in Europe could shift massively,” he said. “Europe and Germany must not continue to depend on American or Chinese providers for digital payment systems for their economy.”

Better technology, problematic regulation

The question of the consequences for “digital sovereignty” is not new. US Treasury Secretary Stephen Mnuchin had already described Libra as a threat to national security in 2019. Facebook boss Mark Zuckerberg had to swear under oath that one would only start after the green light of the regulators in the USA and other countries.

The question of why Facebook and its partners need their own digital currency is still open. Critics refer to the example Paypal. The US group has been processing virtual payments based on real currencies since 1998. Is not this enough?

Libra board member and ex-Paypal manager Perez explains that the blockchain is a more modern technology than the financial industry systems, some of which are 50 years old. That makes transactions faster and cheaper.

Perez admits that fees may also apply to Libra: “It depends on the conditions of the banks.” Transactions from one digital wallet to the other are free.

To satisfy regulators around the world, Libra apparently relies on the well-networked Swiss authority Finma. It is now up to this to gather all relevant authorities behind.

“Finma is one of the most renowned regulators. It is open to bringing others to the table, which will help wider acceptance of Libra, ”says Perez. You are currently clarifying whether you also need an EU license.

Volker Brühl, Managing Director of the Center for Financial Studies at Frankfurt University in Frankfurt, studied the new Libra concept. “Facebook and its partners have made every effort to address compliance, customer identification and anti-money laundering issues,” he concludes.

But that doesn’t make the project unproblematic. “There is also a risk that Libra will affect the effectiveness of central bank monetary policy measures,” warns Brühl. The additional introduction of stable-value coins based on dollars or euros does not solve the problem either.

The professor believes that the changed Libra concept brings a new dynamic to the discussion about digital central bank money in the euro zone: “The ECB has to position itself clearly here.” Bring offensive and defend the state monopoly on money.

E-euro as a public alternative

Federal Finance Minister Scholz is also putting pressure on this issue. “It is important that the euro zone becomes quickly competitive with digital payment methods. We have to take seriously the new Libra plans and China’s announcement to try digital central bank money, ”he says. Scholz relies on “innovative European responses to these initiatives.” A strong and sovereign Europe must be able to act independently here.

The CDU / CSU parliamentary group is already demanding a digital euro. And the green finance expert Bayaz wants to forestall Libra: on this basis, “private providers could then process payment services”. According to CDU politician Heilmann, the e-euro could be issued by the commercial banks. The left-wing finance expert Fabio De Masi even calls for direct “citizen accounts” with the ECB.

This is the only way from the point of view of Libra critics to prevent US corporations like Facebook or Chinese providers like Ali Pay from becoming powerful “shadow banks”. Because more players are in the starting blocks. So tinker about Amazon according to insiders for years on their own crypto plans. The online giant has already secured the address Beijing is also driving the development of a national digital currency. The first practical tests for the “E-Yuan” are running.

The Europeans are slower on the road, but also have the issue on the screen. The Bundesbank has been researching blockchain technology and its limitations for years. And the ECB recently put together its own team that is working on ideas for an e-euro.

Whatever solution wins the race: Facebook and Co. don’t want to be put off by it. The partners are also prepared for state digital currencies: According to Perez, the new Libra version should be sufficiently flexible.

“You have to understand that we primarily offer a payment network. If the ECB provided an e-euro, we could simply integrate it into our network. ”In this case, the association would not have to hold any reserves. “That would even simplify our project,” says Perez.

More: Facebook is responding to criticism with a new Libra concept, experts fear the rise to the “powerful shadow bank”.


Hubertus Heil does not want to become candidate for chancellor of the SPD

Hubertus Heil

The SPD politician does not want to be the top candidate of his party.

(Photo: AFP)

Osnabruck Federal Minister of Labor Hubertus Heil does not want to run for the SPD for the chancellorship. Heil told the Neue Osnabrücker Zeitung (Wednesday) that he had no ambitions to apply for the office. At the same time, he praised the work of his party colleague Olaf Scholz: “Basically, Olaf Scholz does an excellent job. I experience that every day. ”The question currently is who the SPD will send to the Bundestag election next year, but“ not in the foreground, ”said Heil.

Salvation had been brought into play by former chancellor Gerhard Schröder among others as a possible candidate for chancellor for the SPD. Among other things, Schröder also mentioned Scholz as a possible candidate.

According to the “Insa opinion trend” for the “Bild” newspaper (Tuesday), the SPD is currently 15 percent. It would be in third place behind Union (38.5 percent) and Greens (16 percent). The Grand Coalition of Union and SPD as well as a black-green alliance would have a majority.

More: Federal Minister of Labor Hubertus Heil campaigns for an increase in short-time benefits.


Nervousness before the big EU summit

Spain’s Prime Minister Pedro Sanchez presented a working paper in which he approached the federal government before the meeting. Like the EU Commission, he also envisions a huge reconstruction fund for the European economy amounting to 1.5 trillion euros.

But at least Sanchez wants to get around the biggest issue: that of common European public debt. Instead, Sanchez’s funding of the fund is based on the Brussels proposal, which is not met with frontal rejection in the federal government.

The idea of ​​the EU Commission is based on guarantees from the member states. This would allow the Commission to raise more debt itself. The advantage: The member states would no longer have to transfer money to the EU budget, but the EU Commission could still finance the reconstruction fund and increase its clout through a “lever”, ie the multiple use of a euro. The financial maneuver is to be secured via the EU budget.

Partial liability as a basis for negotiation

In contrast to corona bonds, i.e. common European debt securities, the Federal Government is more open to this proposal. From the federal government’s point of view, corona bonds are banned simply because they would be highly problematic under constitutional law.

That would be different with the EU proposal. In contrast to corona bonds, the federal government is not fully liable for European bonds that are secured by European institutions, but only in part.

The Federal Government emphasizes how important this is to it in a response to a request from the Greens for European common debts in previous bailout programs.

The issuance of bonds for the EFSM, the predecessor of today’s ESM rescue fund, “is strictly limited in fact and is based on legal acts with a corresponding contractual basis,” writes Finance Secretary of State Bettina Hagedorn (SPD) in the answer.

This would not be the case with corona bonds. The opposition is still putting pressure. “A large reconstruction fund for Europe is now necessary,” says Green budget politician Sven-Christian Kindler. “The Federal Government can no longer refuse to fund the fight against the corona crisis on the basis of solidarity.”

Scholz calls billions

Identical demands come from southern Europe. The Federal Government knows that it cannot oppose everything; the situation in Europe is too tense for that. However, she sees the risk of being legally vulnerable if the reconstruction fund is too large. Ministry of Finance officials and budget politicians also want to keep budgetary risks as low as possible.

Two letters from the Federal Ministry of Finance to the Budget Committee of the Bundestag, which are available to the Handelsblatt, show the burdens that the corona crisis is already having on the federal budget. With them, Federal Finance Minister Olaf Scholz (SPD) is calling new huge billions of dollars.

One day, Scholz wants to have 4.7 billion euros on hand to increase the guarantee volume of the European Investment Bank. He needs another ten billion euros to provide guarantees for KfW’s new fast loan. “The sums show that the risks to the federal budget are becoming more concrete,” says FDP housekeeper Otto Fricke. Another budget politician, who does not want to be named, says: “The government is clearly expecting guarantees to be drawn to this extent – and the money is gone with it.”

More: 16 countries, 16 ways out of the crisis – why Germany’s approach to the corona crisis seems arbitrary.