The department store chain has again applied for state aid.
(Photo: imago images/Marc John)
Berlin, Frankfurt, Dusseldorf The ailing department store chain Galeria Karstadt Kaufhof is negotiating with the federal government about new state aid. As the Handelsblatt learned from negotiating circles, it should be about a new cash injection of more than 200 million euros. According to the idea, the payment should be made over several years.
According to the Federal Ministry of Economics, it is examining the application for additional state aid, but did not want to comment beyond that. Galeria Karstadt Kaufhof declined to comment when asked.
The company had already received state aid of 460 million euros from the WSF rescue fund during the corona crisis. Now the group has once again fallen into crisis due to a weak consumer climate, inflation and high energy prices.
Clear conditions for further help for Galeria
With the recent termination of the collective agreement with the Verdi union, the company has admitted that it is in trouble. Because according to the wording of the collective agreement, termination is only possible if Galeria is in an “existence-threatening economic emergency”.
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That is why the group has once again asked the state for help. In Berlin, further rescue packages for the ailing department store group are controversial. The core question, according to negotiating circles, is: Do you let market forces run free, or do you save the company?
It is clearly in the interest of politics to keep Galeria alive and thus a magnet in many inner cities, according to government circles. However, there are clear conditions for further assistance. The central question is whether, given the structural changes in retail, there is a realistic prospect of going ahead. Department stores have been running away from customers for years, while online retail and shopping centers with branches of fashion chains and other shops are doing better.
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Galeria Karstadt Kaufhof received state aid during the pandemic from the Corona rescue package WSF.
Also of fundamental importance is the assessment of whether the company will be able to repay government aid. According to negotiating circles, it is clear that Galeria will not be able to repay in the short term. In the longer term, i.e. in more than five years, the company may already be able to free itself from state aid.
Berlin politicians are also concerned with the question of what options Galeria owner and billionaire René Benko has to support the company before state aid is applied for.
>> Read also: René Benko on suspicion of bribery: These are the investigators’ allegations against the Galeria owner
There is considerable need for discussion on all of these questions. In order to help with the decision-making process, the federal government has now commissioned a leading auditing firm to prepare an expert opinion on Galeria’s economic situation, according to Handelsblatt information. Coalition politicians expect that the examiners will probably also paint a dreary picture.
The first politicians are now making their skepticism publicly clear. The Green MP Sven-Christian Kindler told the Handelsblatt: “There are many critical questions about the economic perspective of the department store chain.” The federal government must clearly ensure a repayment of possible aid in the interest of taxpayers. “Unfortunately, Galeria’s optimistic forecasts have not materialized in the past,” explained Kindler.
Expert has little hope for Galeria
Experts are even more skeptical. Martin Fassnacht, economics professor at the Otto Beisheim School of Management, says: “Another state loan for Galeria would be a real scandal and an impertinence towards the competitors who have to secure their future with their own resources.”
He sees no positive continuation prognosis for the company. Galeria has too much competition in all categories, both in stationary and online retail. The department stores do not offer the cities a forward-looking concept. “Politicians must not allow themselves to be blackmailed with the 130 locations,” said Fassnacht. “The taxpayer will most likely not get the money back,” warns Fassnacht.
Another government loan for Galeria would be a real scandal and an impertinence to the competitors who have to secure their future with their own resources. Martin Fassnacht, Professor of Economics at the Otto Beisheim School of Management
Verdi has meanwhile announced that it will resume negotiations with the company management after the termination of the collective agreement. “Not only the company, but also the approximately 17,000 employees are in an emergency,” explained Stefanie Nutzberger, member of the Verdi national board. “That’s why we will negotiate a collective agreement that guarantees a living wage.” So the union has not yet given up the fight for Galeria.
Transparency note: The Handelsblatt Media Group, like the Signa Holding of Galeria owner René Benko, is involved in the digital education platform Ada.
More: Resistance to state loan for department store grows due to high losses.