Germany to lend €100m for Irish businesses ‘by summer’

Minister of State for Finance Brian Hayes has indicated that Irish small and medium-sized enterprises should be able to tap over €100 million in credit from Germany’s state-owned KfW bank by the middle of the year.

Berlin sources confirmed yesterday that talks were at an advanced stage on the framework of the loan, agreed last November in principle between Taoiseach Enda Kenny and chancellor Angela Merkel.

“It will be €100 million-plus and I think that will make a significant difference,” said Mr Hayes yesterday in Berlin. “I don’t want to be too prescriptive about the timeline but it would be great to see it before June.”

Intensive talks have taken place in recent months between Dublin officials, the finance ministry in Berlin and the KfW bank, headquartered in Frankfurt.

The exact level of the loan to Ireland will be decided not by the KfW but the German federal government, once it is happy that the loans to Irish businesses will carry a full Irish State guarantee. Other outstanding concerns include ensuring that the loans will fund real business investment, at arm’s length from politics, and that the investment is structured so the European Commission does not view it as state aid and a market distortion.

Intended source
A final concern is how to ensure that the KfW loans actually reach their intended source – business start- ups and SMEs operating in the real economy. With no Irish equivalent to the KfW, the Government plans to make the new Strategic Investment Fund the Irish partner.

Irish businesses interested in borrowing from the KfW fund will deal directly with their existing bank. Irish commercial banks will then draw down funds on their customers’ behalf.

Given Irish banks’ recent lending record to business, however, officials are discussing how to ensure the KfW loans are put to work.

There are concerns that banks, facing another round of European stress tests this year, might be tempted to hold on to money to improve their capital position.

“I have no reason to believe we won’t be able to get this over the line,” said Mr Hayes. “The greater the pool of funding that can be made available to start-ups and SMEs, the better for the Irish recovery.”

In Berlin yesterday, Mr Hayes met ex-ECB board member Jörg Asmussen, now a state secretary in the federal labour ministry. Today Mr Hayes attends IDA Ireland events in Düsseldorf and visits the Irish Dairy Board’s nearby Kerrygold factory to learn more about Germany’s dual vocational training system.