In a March 13th press conference, Germany’s Finance Minister Olaf Scholz demonstrated the power of public banks in times of crisis. He promised German companies that KfW, the country’s public bank network, would provide all the credit they need during this ongoing pandemic. The Daily Mail quoted Scholz:
“There is no upper limit to the credit offered by KfW, that’s the most important message. … If [the pandemic] lasts longer, we can go on longer. You can be courageous, the risks will be carried by us.” Minister of Economics and Energy Peter Altmaier added:
“Some €550 billion ($604 billion) in government-backed loans is just for starters. We promised that we will not fail because of a lack of money and political will. This means that no healthy company, no job should find themselves in trouble.” Businesses in Germany can immediately access loans up to €500,000, made available through their local banks or Sparkassen. The loans are being made available at an interest rate as low as 1%, with interest only for the first two years.
In contrast, the U.S. aid plan announced by President Trump authorizes the SBA to offer loans to businesses only after a lengthy process of designation by state authorities. The interest rate will be 3.75%, a whopping 1.75% above the KfW rate.