Metro aims to take over bankrupt Arcandor

Germany top retailer Metro wants to snap up distressed rival Arcandor and possibly list a new group on the stock exchange, Metro boss Eckhard Cordes said on Wednesday.

Metro aims to take over bankrupt Arcandor
Photo: DPA

“We have a short and medium-term objective to create a large new ensemble and I even think … it might be possible to list such a company on the market,” Cordes told ZDF television.

The private investment bank Merck Finck it would “regard a combination as positive,” but maintained its outlook for Metro stock on hold.

Arcandor filed for insolvency on Tuesday after failing to obtain state aid under a programme for companies hit by the global economic downturn because it is accused of bad management before the crisis erupted.

It was one of the biggest non-financial failures in Europe since the global financial and economic crisis erupted nearly two years ago. About 43,000 jobs are at risk, though they do not include staff at the British travel group Thomas Cook, in which Arcandor holds a majority stake of 53 percent.

In the event of a merger, Metro would regroup its Kaufhof chain with rival Karstadt, owned by Arcandor, and retain about 160 of the combined 200 department stores, Cordes said.

“The chief executive spoke not only of a German department store group, but even of a European one,” Merck Finck noted.

Following a two-year restructuring, Metro would like to sell most of the combined operation, a spokesman was quoted by the business daily Handelsblatt as saying.

If that does not take place via a public listing of shares, Metro might look for a private investor.

Handelsblatt said Italian retailer Maurizio Borletti, backed by a financial group, could be interested.

“We are currently participating in discussions,” Borletti told the newspaper, without providing details. He owns the Italian chain Rinascente and also holds a minority stake in the French retailer Printemps.

Political fallout

The collapse of the vast German retail group has erupted into a bitter fight on as

politicians gear up for a national election in less than four months.

The centre-left Social Democrats (SPD), who hope to unseat Chancellor Angela Merkel in elections in September, attacked a rising star Economy Minister Karl-Theodor zu Guttenberg who is a key conservative ally for Merkel.

They accused zu Guttenberg of stabbing labour in the back for opposing Arcandor’s request for emergency state aid as well as for arguing two weeks ago against a rescue for GM subsidiary Opel with billions of euros of state aid.

“In a government, we must all pull together,” said Frank-Walter Steinmeier, the SPD’s candidate for chancellor as well as foreign minister and vice-chancellor under Merkel in Germany’s unwieldy grand coalition government.

“It cannot be the case that we have a labour minister who fights for people’s jobs and a economy minister who fights for insolvencies,” Steinmeier told mass circulation daily Bild.

Wolfgang Tiefensee, also from the SPD, the junior partner in the ruling coalition, said zu Guttenberg’s actions were “unacceptable.”

Tiefensee told NDR info radio: “I expect from an economy minister that he tries to ensure that employees keep their jobs.”

But zu Guttenberg hit back, telling Bild in an interview: “If the owners and creditors are not prepared to take the risks, then we cannot burden the taxpayers with them.”

“In addition, bankruptcy now is not the end, but it can be used as a springboard for a successful new beginning,” he added.

Both Merkel and zu Guttenberg have justified the refusal to bail out Arcandor by saying that it was a very different case from that of Opel.

To tap into a special “Germany Fund” established to help firms in difficulty due to the financial crisis, companies must prove they were solid before the recession hit.

Berlin said that Arcandor was struggling before the downturn whereas Opel had been hit with the double-whammy of the credit crunch and a collapse of the auto industry.

“We must think about the taxpayers,” Merkel told reporters on Tuesday.

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Is now the best time to open a savings account in Germany?

Interest rates are on the rise, with some banks now offering as much as 3 percent on savings accounts. Here's why it could make sense for people in Germany to stash some money away now.

Is now the best time to open a savings account in Germany?

After years of rock-bottom rates, interest is on the rise for customers in Germany once again – which is bad news for borrowers, but great news for savers.

Following moves by the European Central Bank (ECB) to hike interest rates in the final months of 2022 and the first three months of 2023, German banks have been revising their offers to customers and wooing newcomers with even more attractive offers. 

Most recently, ING released a new promotional offer: customers can get up to three percent interest on their savings for a full six months. That equates to €150 interest on €10,000 after just half a year. 

The offer is available not just for switchers but also for existing customers, encouraging people to withdraw cash from other accounts and add it to their ING savings account. 

Meanwhile, competitors such as comdirect, Targo Bank and Consors are offering between 2 and 2.4 percent interest on savings. 

READ ALSO: Why 2023 will be a better year to grow your savings in Germany

Will other banks follow suit?

According to Max Herbst, a consultant at Frankfurt-based financial consultancy FMH, the latest promotion from ING will place other banks under pressure to compete.

“This is typical ING, they want to make money – and at the expense of other banks,” Herbst told Taggeschau. “Because the offer is not only for new customers, but also for the so-called ‘fresh money’.”

This means that existing ING customers are still likely to reconsider where they put their money and potentially divert funds from other savings accounts into the bank with the highest interest rates – at least for the next six months.

“The competition is now under pressure to catch up with ING,” Herbst added. “The other big ‘call money banks’ are certainly already sitting in the starting blocks.”

Competitive deals could emerge at any time, so opting for a flexible bank account that allows customers to withdraw savings at short notice could be the best option.

However, Herbst recommends that people in Germany start saving right away rather than waiting for potential further rate hikes and banking deals.

“Every day that customers wait now is one day too many,” he explained. If numerous customers start to switch, it could also encourage banks to offer more competitive rates. 

“The more customers leave, the greater the pressure on the banks,” Herbst added.

Opening a new bank account – or switching from your existing provider – has also become much simpler recently.

Normally the process involves filling in an application online in a few minutes and then verifying your identity via video chat using the so-called “Video-Ident” procedure. 

READ ALSO: The complete guide to opening a bank account in Germany

What to consider when picking a savings account

When finding the best deal on a savings account, it’s worth paying attention both to the interest rate and how long it lasts.

With many sign-up promotions capped at a certain amount of months, it’s not always easy to work out which will be the best offer for growing your money, so be sure to use an online interest rate calculator to work out which deal gives you the best return.

A man withdraws money from an ATM.

A man withdraws money from an ATM. Photo by PHILIPPE HUGUEN / AFP

Suresse Bank, a subsidiary of the Spanish bank Santander, currently offers 3.008 percent interest – but only for four months. So while it may be worth taking up this offer, some customers may be better off opting for a slightly lower interest rate over a longer period of time.

The other key thing to be aware of is the fact that interest rates could go up again if the ECB decides more rate hikes are necessary in order to combat inflation.

That means people who want to get the best deal should be prepared to switch banks after a relatively short amount time and keep an eye out for new offers. 

“You should not let yourself be guided by convenience when it comes to a call money account, because every new customer eventually becomes an existing customer,” said Herbst.

However, you should note that having too many accounts open at once can potentially affect your credit score, so try and close any unused accounts when you can. 

Is my money safe in a savings account?

Following the recent turmoil in the banking sector, customers are increasingly keen to make sure their money is safe. 

The best way to this is to ensure that any savings account is covered by the German deposit guarantee, which ensures amounts of up to €100,000 per customer are protected under EU law.

Financial experts at Stiftung Warentest also recommend banks that are based in economically strong EU countries. This would mean that banks in Spain – such as the aforementioned Suresse Bank – but also institutions in Portugal, Ireland, Italy or Poland are ruled out.

A signs of Swiss bank Credit Suisse is seen in Basel.

A sign of Swiss bank Credit Suisse is seen in Basel. Credit Suisse was recently bailed out in an emergency deal after heading towards bankruptcy. Photo: Fabrice COFFRINI / AFP)

However, FMH expert Herbst doesn’t believe the risks of using these banks is too high. “The probability that I will make losses as a saver in Europe with any call money account and an investment sum of up to €100,000 is close to zero.”

In Germany, moreover, many German private banks belong to the voluntary Deposit Protection Fund of the Association of German Banks. So can overnight savers safely invest more than €100,000 here? “Anything over €100,000 is a voluntary promise by the banks,” says Herbst. “If you really want to be on the safe side, you should split amounts over €100,000 among several banks.”

REAED ALSO: EXPLAINED: How America’s banking crisis could hit consumers in Germany

Less than inflation

With inflation estimated to have hit around 7.4 percent in the first quarter of the year – and remain high throughout 2023 – banking customers should be aware that their money will generally be losing value in a savings account, even though interest rates are higher.

Though fixed-term savings accounts can often offer more competitive rates, the downside is that you have far less access to your money in the case of emergencies, and may be locked in to a rate that becomes less competitive over time. 

READ ALSO: How to protect your savings against inflation in Germany

In contrast to this type of savings account, a call-money account is generally intended to offer an emergency fund for unexpected situations like an expensive car or home repair or a sudden job loss. 

For people with much larger savings – i.e. well above three or six months’ salary – this type account may not make the most sense.

After putting aside an emergency cushion, Herbst suggests that bigger sums could get a better yield in investments or EFTs.