Germany extends long-term export credit scheme

The German government will extend its refinancing scheme for long-term export credit until December 31, 2010.

The scheme was initially approved for a six-month basis by the European Commission in September 2009 to encourage banks to provide long-term credits for export operations.

Under the scheme, German development bank KfW purchases export loans from banks and in return, banks must provide new export loans for an equivalent amount, with the German government covering the loans with 100% credit insurance.

The scheme has been given permission to continue by the EU after the continuing negative effects of the financial and economic crisis on export credit markets.

Markus Schmidtchen, first vice-president and head of the programme at KfW, says: “KfW has implemented this programme on behalf of the German government to ensure that sufficient long-term refinancing funds are available to the German export industry in difficult times. The financing situation remains fragile with banks still digesting the effects of the financial crisis. We therefore welcome the decision of the European Commission to agree to an extension.”

However, the scheme is mainly aimed at niche cases, with smaller institutions and loans with particularly long tenors that are getting the most from the project.

Matthias Wietbrock, head of export and trade finance at KfW, tells GTR: “What we see is that liquidity is not really the problem it was a year ago. For private sector banks, refinancing export loans is not a huge issue any more. This is also due to the public sector liquidity support, such as the KfW programme. Of course, there is demand for this support, especially from banks that have a conservative refinancing strategy.”