Germany Overhauls Export Credit System to Strengthen Global Competitiveness
Germany has introduced a reform package aimed at expanding the scope of its export credit agency, Euler Hermes, in a move to address rising energy costs and fierce global competition, particularly from China. The reforms, which include a shift to a more flexible “flex&cover” strategy, are designed to bolster Germany's industrial base and strengthen its global trade presence.
Flex&Cover: A New Approach to Export Credit
In January, Germany's Economy and Climate Minister Robert Habeck announced significant changes to Euler Hermes’ export credit criteria. Previously, companies had to source 49% of goods from German suppliers to qualify for export credit. Under the new framework, Euler Hermes will consider the broader global footprint of companies, focusing on factors such as employment, R&D, tax contributions, and a company's headquarters location.
Manuel Dircks, head of transportation at Euler Hermes, explained that these changes will make the process faster and more flexible, ultimately supporting Germany's competitiveness in global markets. This move comes as Germany faces challenges in its export sector, with a projected 0.3% decline in exports this year, exacerbated by geopolitical tensions and competition.
Paradigm Shift in Export Credit
The “flex&cover” initiative marks a significant departure from the past, where strict documentation was required to meet the 49% local content rule. Klaus Mai, senior advisor at UniCredit, calls this shift a “paradigm change,” as the focus will now be on the broader economic contributions of German exporters, including their global operations and national interest alignment. This change mirrors practices seen in other European countries, such as France's BPI.
For German companies, both large and small, the flexibility will make it easier to access export financing, as it allows for a broader definition of what constitutes a qualifying export.
Defence Sector Reforms: Streamlining Approval
The reforms also include changes to Germany's historically conservative approach to defence exports. Previously, each defence deal required individual approval from the Ministry of Defence, limiting the scope of exports. Under the new policy, Germany now has a standard coverage for defence deals, particularly with NATO allies and other strategic countries. This reflects Germany's updated national security strategy following the Russian invasion of Ukraine.
Other Key Measures
Euler Hermes has also increased its counter-guarantee limit from €80 million to €120 million, responding to growing demand in sectors like wind energy. Additionally, the agency has streamlined its “shopping line” product, which helps SMEs access large foreign procurement programs. Furthermore, Euler Hermes is expanding its forfaiting guarantee to include trading companies, making it easier for these firms to sell receivables.
Conclusion: A Strategic Move for Global Trade
Germany's export credit reforms signal a strategic shift to enhance the country's global competitiveness, particularly in the face of rising global challenges. By adopting a more flexible and comprehensive approach to export financing, Germany aims to strengthen its position as a key player in international trade, offering more support to exporters and fostering stronger global partnerships.
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