The Great Debate UK

Berlin must refuse Arcandor credit note

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alexander-smith– Alexander Smith is a Reuters columnist. The opinions expressed are his own –

Arcandor’s chief Executive Karl-Gerhard Eick has warned that if his department store group is forced into insolvency, it will do to the retail sector what the collapse of Lehman Brothers did to finance. It is hard to know whether Eick really believes this, although one has to hope he does not.

The German government, at whom this hyperbolic claim is directed, should certainly block its ears. It may be tempting to step in to help a company that employs 53,000 people in Germany so close to an election, and the SPD half of the governing coalition has been pushing hard for a helping hand to be extended. But there is simply no justification for government assistance in this case.

The state should not intervene in a situation where there are more than enough assets to meet the debt repayment of 710 million euros ($1.01 billion) being demanded by Arcandor’s lenders — Royal Bank of Scotland, Commerzbank and BayernLB. There is also a further 250 million euros due in September, but this could also be covered.

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