Corporate credit

Germany's small and medium-sized businesses, also known as the "Mittelstand," are the backbone of the German economy, but companies have struggled to secure adequate financing during the recent recession.

To help companies access funding, the state-owned development bank KfW is setting up a fund of 300 million euros initially, which could then be boosted to 500 million euros at a later stage.

"We're in the advanced stages of deliberations on this," said Ulrich Schroeder, head of KfW. Schroeder added that KfW is in talks with several banks to contribute to such a fund. Media reports suggest Commerzbank may be one of the banks.

Germany's biggest bank, Deutsche Bank, has already set up a similar fund. Chief executive Josef Ackermann said at the company's annual general meeting that he is looking for investors to be able to boost funding for SMEs.

Lack of equity

The lack of adequate equity is one of the main problems of Germany's Mittelstand. According to a recent KfW survey, over 61 percent of companies with sales of up to 50 million euros had problems securing any kind of financing during 2009.

Another survey, by the Ifo economic institute, paints a slightly more upbeat picture. Among the 4,000 firms polled during May, 35.6 percent complained about not receiving adequate loans, the lowest percentage in 18 months.

"That's a good sign for the economy," Ifo chief economist Klaus Abberger said, but conceded that it is too early to speak of a real recovery. In fact, KfW's Schroeder does not expect an improvement any time soon. The debt crisis in Greece could even exacerbate lending conditions and thus jeopardize any signs of an upswing in the economy.

"The credit crunch [lack of access to credit] is still the nemesis of German companies at the moment," said German Retail Association managing director Stefan Genth.

ng/Reuters/apn
Editor: John Blau