Germany has agreed to extend a backstop for commercial credit insurers by six months to keep trade flowing and prevent bankruptcies as the economy is hit by a second wave of the coronavirus pandemic.
According to a Bloomberg report citing a statement by the German finance and economy ministries, the government will guarantee losses of up to EUR30bn ($36.5bn) through to the end of June under this deal.
In return, insurers will surrender just under 60% of their premiums for the period to the government. The industry also agreed to maintain most of its coverage. However, the deal still requires a sign-off by the European Commission.
The backstop was first agreed in April and is part of an unprecedented package of stimulus and relief measures aimed at containing the damage from widespread economic lockdowns.
The extension comes as Germany is bracing for a surge in insolvencies after a moratorium to help companies survive the coronavirus outbreak came to an end while the country is still engulfed in a second wave of the COVID-19 pandemic.
The backstop is “one of the most important cornerstones for a rapid further stabilisation of the local economy and businesses”, said Euler Hermes CEO Ron van het Hof.