Justus Haucap had already guessed it. “The structural problems of Galeria Karstadt Kaufhof are likely to persist even after the pandemic,” said the former President of the Monopolies Commission when WELT asked him in January about his assessment of state aid of 460 million euros.
It’s that time of year again. The department store group needs another large loan to close the gaps in the lockdown. But while observers were still wondering six months ago how noiselessly the approval of the large loan from the Economic Stabilization Fund (WSF), founded to cushion the consequences of the corona, went on the political stage, there is now a difference: There is an election campaign.
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The decision is dragging on, although this time it is probably a much smaller sum. Originally, in April there was talk of a further 200 million euros, which would be necessary to secure the future. It is now becoming apparent that a much smaller amount will actually be needed, said a person who is familiar with the processes in the company, without naming an order of magnitude. Business is going better than expected after the lockdown.
So far, the company headquarters of Galeria Karstadt Kaufhof (GKK) in Essen has not received any notification of the requested second state loan, the person said, thereby confirming a report by the “Handelsblatt”. The company did not want to comment on the issue.
The money would be lost to the taxpayer
An end for the last remaining department store group in Germany in the middle of the recovery phase after the pandemic could trigger a political quake. On the one hand, a final end of the troubled group would endanger over 17,000 jobs. On the other hand, the 130 Karstadt and Kaufhof department stores, which are all centrally located in the cities, are still considered bearers of hope for a revitalization of the battered pedestrian zones.
In addition, there is a self-interest of the state: A renewed insolvency after the protective shield proceedings, which only ended last September, would make repayment of the first WSF large loan illusory. The money would be lost to the taxpayer – a difficult message to convey to both the Economy and Treasury departments.
The responsible Federal Ministry of Economics does not even want to officially confirm or deny whether there is even an application from GKK for further aid money. Negotiations have been going on behind the scenes for weeks. Both departments are in a dilemma, because a renewed approval should not look like frivolous generosity.
After all, the owner of the department store company, the Signa Group of the Austrian real estate tycoon René Benko, is in good financial shape. Even in the corona crisis year 2020, it generated a net profit of more than 800 million euros, after a record income of 1.1 billion euros in the previous year.
“Benko will have to pay a contribution”
“There will be a face-saving compromise. Benko will probably have to make a significant contribution, ”predicts the economist and trade expert Gerrit Heinemann from the Niederrhein University of Applied Sciences. The decision on the loan could become even more explosive because the two federal ministries involved must try to avoid any appearance of a conflict of interest.
Because both Federal Economics Minister Peter Altmaier (CDU) and Finance Minister Olaf Scholz (SPD) sit on the board of trustees of the Essen RAG Foundation, which bears the financial consequences of centuries of digging after the end of German hard coal mining.
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This is why the foundation is investing its 20 billion euros in assets on a broad basis and as profitably as possible – including in Signa Prime Selection, a sister company of Galeria Karstadt Kaufhof.
In Prime Selection, Benko has bundled the group’s premium properties, including the Hamburg Alsterhaus, Oberpollinger in Munich, KaDeWe in Berlin and the Goldene Quartier in Vienna. The RAG-Stiftung’s chief financial officer, Jürgen Rupp, was extremely satisfied with the four percent dividend from Signa when he presented the foundation’s balance sheet last week.
The Ministry of Economic Affairs does not want to comment on the connections between the federal government and the Benko group.
The other millions are controversial
Massive criticism of possible further aid for Galeria Karstadt Kaufhof comes from the CDU Economic Council. “The company was already in trouble for everyone before the corona pandemic,” says Wolfgang Steiger, Secretary General of the Economic Council, WELT.
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“It is hard to see why the state should now use taxpayers’ money to secure the business model of a troubled department store giant, while medium-sized market participants with a healthy business model were just as affected by the lockdown, but often fell through with the aid.”
GKK simply failed to adjust to the new reality in retail even before the pandemic, argues the Economic Council. “Many medium-sized entrepreneurial families have all their assets in the company and had to burn the reserves of the last ten years in the difficult months of the lockdown in order to cope with the crisis,” says Steiger.
Consequences after the election at the earliest
Nevertheless, many entrepreneurial families have geared their strategies to the future, for example by investing in special online offers. “We weren’t able to observe that with the said department store giant – and now the state should fix it? That cannot be communicated, ”says Steiger.
The Economic Council also calls for the millions of aid that have already been decided to be linked to further conditions. “Since the state has already decided on its investment in the department store group, it must at least have a value protection issued by the owner in return for the payment,” demands Steiger.
Benko has already secured himself personally by outsourcing the high-priced department store properties. Economist Heinemann doubts that another loan will permanently reorganize the company: “The issue of jobs will be postponed until after the election.”
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