In a recent analysis, Idea compares Luxembourg’s stability pact with financial aids accorded to the respective economies in France and Germany. Aids in Luxembourg accord for 14% of the GDP, while they make up 47% in Germany. However, when it comes to how these aids are distributed, it stands out that the German government has focused mainly on guarantees on loans. Meanwhile, the majority of aid in Luxembourg is used to provide liquid assets to companies.
According to Sarah Mellouet from Idea, the direct aid provided by the German government is however also quite significant: “The available direct aids in Germany should also be pointed out, especially in their extent. Also, many people have stressed how easily accessible they are. In fact, when it comes to the payment of these aids this “criteria of efficiency” is often highlighted as a crucial point because it avoids uncertainty for freelancers as well as small and medium-sized businesses. Therefore, this is a crucial point in the German plan which is often highlighted.”
However, Ideas’ economists also point out that guarantees on loans don’t say anything about how much it will ultimately cost the state: “Contrary to direct aids, guarantees on loans don’t necessarily include payments. This is to say that currently, we can’t anticipate how much states will actually have to pay as ‘underwriters’ of loans for businesses. These are quite significant amounts: 300 billion in France and over 1,000 billion in Germany. These are enormous amounts and as of right now we don’t know what the net loss or expenditure for the states will be.”
Idea has also proposed a series of measures which could complete the current stability pact in Luxembourg. A public fund for instance, which could be used to buy shares in companies which have been hit particularly hard by the crisis.
