A casual obsever of Germany’s Länder (or regional states) government system could be forgiven for thinking it involved labyrinthine layers of complexity and duplication.
The Länder have occupied acres of newsprint this week as four in particular – Hesse, Thuringia, North Rhine-Westphalia and Rhineland-Palatinate – met German chancellor Angela Merkel yesterday (10 June) in Berlin to discuss the fallout of Opel’s failure to secure loan guarantees for restructuring.
Go deeper with GlobalData
German taxpayers do not pay twice however. The fiscal pot is divided at the start of the taxation process so that finance is spread between federal and Länder responsibilities.
There is also a complicated ‘levelling system’ – much like the European Union – where richer Länder help out their poorer cousins.
But where the outside observer might scratch his head is a system where the federal economics minster – Rainer Bruderle – rejects Opel’s request for loan guarantees – but where the Länder could take up the slack.
It would appear the federal minister cannot overrule his regional counterparts allowing Opel to possibly secure guarantees from that source as the Länder clearly have a vested interest in the automaker’s plants remaining in their regions.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataIt is inconceivable Opel CEO Nick Reilly and his bosses in Detroit would not have examined this potential new funding route, although the boss yesterday hinted had he known the outcome of Bruderle’s deliberations, he would have acted sooner.
There are some pretty clever people in Detroit and Russelsheim and they must have been poring into every nook and cranny for alternatives as soon as it became clear which way the wind was blowing.
And today’s news Opel has approached the European Investment Bank (EIB) for loans that could total EUR800m is another example of creative thinking.
GM’s former Saab division benefited hugely from EIB loans, although Opel must have realised with a shudder it would also have to secure guarantees to underwrite those loans.
Perhaps not the best time to rush back into the arms of Herr Bruderle’s economics ministry, but a dual guarantee plan involving the Länder for both Opel’s requests may be on the cards.
