Luxembourg's Ministry of Finance has announced the extension of the state-guaranteed loan regime until the end of December 2021.
The Minister of Finance, Pierre Gramegna, and representatives of the BCEE, BIL, BGL BNP Paribas, Banque de Luxembourg, Raiffeisen, ING, Bank of China and Banque BCP banks have just signed the amendments extending the scheme for state-guaranteed loans for the benefit of the Luxembourg economy in the context of the COVID-19 pandemic, from 30 June until 30 December 2021.
Through this scheme, announced on 25 March 2020 as part of the economic stabilisation programme, the state guarantees bank loans granted to companies up to €2.5 billion over a maximum period of six years. The scheme, which forms part of government measures to support the economy during the pandemic, has been added to the moratoriums on existing loans that the banks had committed to granting to companies in the acute phase of the crisis. By the end of 2020, banks had granted Luxembourg companies moratoriums with a cumulative value of around €4.5 billion.
From the launch of the scheme until 28 June 2021, the State Treasury, which is in charge of the management of guaranteed loans, recorded loans with a total volume of €186.6 million, of which the Luxembourg state guaranteed 85%, i.e. €158.6 million. According to the Finance Ministry, the relatively low rate of recourse to state-guaranteed loans underlines the effectiveness of the panoply of measures put in place by the government to support all sectors of the economy and also demonstrates the resilience of the Luxembourg economic fabric.
It is mainly companies in the trade sector that have made the most use of this aid, with a nominal amount of loans granted to the tune of €60.8 million. The other sectors concerned are the manufacturing industry with €24.4 million and construction with €23.7 million, as well as accommodation and catering with more than €21 million in allocated loans. Banks have also provided unsecured state loans of more than €309 million to support businesses.
Finance Minister Pierre Gramegna and representatives of the eight participating banks signed this agreement back in April 2020. Initially limited in time until 31 December 2020, it was extended for the first time until 30 June 2021 before being extending now once more. At present, the Luxembourg state has not yet had to intervene as a guarantor on an outstanding loan.
Minister Pierre Gramegna commented: “In this crisis, banks are part of the solution. During the first months, the moratoriums granted by the banks made it possible in particular to give Luxembourg companies an essential breath of fresh air. In addition to these moratoriums and other aid put in place by the government, the COVID-19 loans guaranteed by the state will have provided the necessary liquidity to prepare for the exit from the crisis. Its extension until the end of the year will make it possible to continue to mobilise the investments essential to further accelerate the recovery and build the future. I would like to thank the ABBL [Luxembourg Bankers' Association] and the banks who took responsibility and showed solidarity in making this scheme possible".
Guy Hoffmann, chairman of ABBL, added that “state-guaranteed loans are an additional tool in the range of solutions that banks can offer businesses, solutions that will help them overcome the effects of the pandemic and to ensure that the economy continues to recover".
