Measures Taken by the Federal Ministry of Finance and the Federal Ministry of Economics as a Result of the Coronavirus


A "protective shield" will be erected for employees and companies, based on the four pillars of making short-time working allowances more flexible, tax liquidity support for companies, billion-euro aid programs for businesses and companies and strengthening European cohesion.

1. Facilitation of Short-Time Work Compensation

In order to safeguard jobs, the short-time working arrangements will be adjusted by the beginning of April. The hurdles for short-time work will thus be lowered. The "Act on Temporary Crisis-Related Improvement of the Regulations for Short-Time Work Benefits" provides for the following measures

  • A company can declare short-time work if at least 10 percent of the employees could be affected by the loss of working hours. The threshold is currently 30 percent of employees.
  • The build-up of negative working time balances is to be partially or completely avoided. Furthermore, in companies where agreements on working time fluctuations are used, these should also be used to avoid short-time working and be driven into minus. 
  • Temporary employees can also receive short-time working compensation.
  • The Federal Employment Agency is to reimburse employees' social security contributions in full.

Also see our labor law experts’ article on this: Coronavirus and Labor Law: Short-Time Work and the Effects of School and Day-Care Centre Closures

2. Tax Policy Measures

  • It should be made easier for Tax authorities to grant deferrals of tax debts. If tax collection would represent a considerable hardship for the company, tax authorities can defer taxes, wherefore no strict requirements should be imposed.
  • The tax authorities want to waive enforcement measures and late payment penalties until the end of 2020 for companies directly affected by the coronavirus.
  • The possibilities for reducing advance payments should be improved. The tax prepayments are to be reduced quickly and easily as soon as it is clear that taxpayers' income is likely to be lower in the current year.
  • In the case of taxes administered by the customs administration (e.g. energy tax and air transport tax), the Directorate General of Customs was instructed to accommodate taxpayers. The same applies to the Federal Central Tax Office, which is responsible for insurance tax and value added tax and should proceed accordingly.

3. Liquidity Support for Companies  

In order to maintain the financial liquidity of companies that might get into financial difficulties due to a decline in turnover, companies and employees should be protected by new measures unlimited in volume. First and foremost, existing KfW-Bank liquidity assistance programs will be expanded to facilitate access to cheap loans. The ministries name the following instruments:  

a.    Companies that have been on the market for more than 5 years: 

  • KfW Entrepreneur Loan:
    • Assumption of risk (indemnity against liability) for the on-lending financing partners (usually the house banks) of up to 80% for working capital loans of up to EUR 200 million credit volume. A higher risk assumption can make it easier for the financing partners to be willing to grant a loan.
    • Opening of the exemption from liability also to large companies with annual turnover of up to EUR 2 billion (previously EUR 500 million)
  • KfW Loan for Growth 
    • Temporary extension to general corporate financing including working capital by way of syndicated financing (previously limited to investments in innovation and digitization)
    • Increase of the turnover limit for eligible companies from EUR 2 billion to EUR 5 billion.
    • Increase of the pro-rata risk assumption to up to 70 %. This will facilitate access for medium-sized and larger companies to individually structured, tailor-made syndicated financing

b.    Young companies that have been on the market for less than 5 years: 

  • ERP Start-up Loan - Universal
    • Risk assumption of up to 80 % for the on-lending financing partners (usually the house banks) for working capital loans of up to EUR 200 million. A higher risk assumption can make it easier for the financing partners to be willing to grant a loan.
    • Opening of the exemption from liability to large companies with an annual turnover of up to EUR 2 billion (previously EUR 500 million)

c.    For companies with a turnover of more than five billion euros, support will continue to be provided on a case-by-case basis.

Another point concerns companies that wish to obtain guarantees for loans. These can turn to the guarantee banks of the federal states. The maximum guarantee amount at the guarantee banks is doubled to 2.5 million euros. The large guarantee scheme, which has so far been restricted to enterprises in structurally weak regions, will be opened up to enterprises outside these regions. Here the Federal Government makes it possible to secure working capital financing and investments from a guarantee requirement of EUR 50 million upwards and with a guarantee ratio of up to 80 per cent. In the federal budget, a guarantee framework of around EUR 460 billion is available for KfW's programs and can be increased by up to EUR 93 billion if necessary. 

Export transactions are also supported by export credit guarantees (so-called Hermes Cover).

4.    Strengthening European Cohesion 

The aim is to interlock the corona measures in exchange with the European partners. The Federal Government is providing 25 billion euros for the European Commission's "Corona Response Initiative"-idea. Across Europe, companies affected by the coronavirus are to be supported by providing liquidity. The European banking supervisory authorities announced that they would make use of existing leeway so that banks could continue to provide reliable liquidity to the economy. The European Central Bank announced measures to provide liquidity to banks.