- European Commission has approved German scheme worth €20 billion for assisting companies hit by Russian sanctions
- Attack on Ukraine has given rise to the unprecedented humanitarian and economic crises.
- German Scheme is the part of State Aid and will support Industries and sectors impacted by crisis and sanctions.
The European Commission has approved German scheme worth €20 billion or USD 21.6 billion for assisting companies hit by Russian sanctions. Scheme will be implemented through variety of measures and will include direct grants, tax credits, assistance through guarantees, debt financing and structured finance.
Russian military aggression in Ukraine has economic repercussions on the entire European as well as Global market. EU market has been impacted by shrinking demand, interruption of existing contracts and projects, loss of turn-over, disruptions in supply chains. As a result, some of the critical input material may no longer be available to the European Industries or may not be economically affordable.
Ukraine is the bread basket of Europe. Situation in Ukraine has given rise to global food insecurity especially relating to cereals and vegetable oils including overall impact on fisheries, agriculture and food processing. Further, EU energy market has been significantly impacted. EU is witnessing an increase in electricity and gas prices. Backed by fear, energy prices started increasing weeks before the physical aggression, impacting key economic sectors like transport and tourism which were already weakened by the pandemic.
Fertiliser supply has been severely impacted by import restrictions from Russia and Belarus and further pressured by higher energy cost leading to significant increase in fertiliser prices in Europe.
Crisis will have serious consequences on the supply of grains e.g. maize and wheat and oilseeds including sunflower, rapeseed, supply of starch-derivatives from Ukraine and Russia to the EU. combined impact of increases in energy cost, fertiliser, grains will significantly impact the livestock farming. Ukraine is an important producer as well as exporter of vegetable oils. Increase in prices of Agri products will impact EU food-processing industries and will force EU corporations to look for alternative supply.
Global liquidity is squeezing as central banks are hiking the interest rates and commodities are on upswing due to supply chain disruption. Attack on Ukraine has given rise to the unprecedented humanitarian and economic crises as refugees are moving into European countries.
As a result, European Commission had earlier decided to specify the criteria and develop framework for the European State aid measures for strengthening the industries and sector deeply impacted by the attack. Coordinated economic response of EU Member States and institutions has been developed to mitigate the social and economic consequences of the War, with focus on preserving economic activities and jobs.
German Scheme is the part of State Aid and will support Industries and sectors impacted by crisis and sanctions. Scheme will be valid till December 31st 2022 and will help in mitigating economic crises in the member state.
Author: Kapil Jain
Kapil is a Finance professional with deep interest in Markets, Geopolitics, Sports, Travel and Emerging Tech