Economic Stabilisation Fund (ESF)

The Economic Stabilisation Fund (ESF; in German: Wirtschaftsstabilisierungsfonds, WSF) was created by law in March 2020 to address the economic and social impacts of the coronavirus pandemic on the national economy. Since November 2022, the purpose of the WSF has been expanded to include the financing of the package of measures to mitigate the consequences of the energy crisis.

Overview

With the approval of the Bundesrat (Federal council), the German parliament passed the law on the establishment of an economic stabilisation fund (Economic Stabilisation Fund Act - WStFG) on 27 March, 2020. This laid the foundation for implementing necessary measures to stabilise companies in the real economy and to avert negative effects on the labour market. The granting of stabilisation measures was initially limited until the end of 2021 and was later extended until 30 June, 2022.

In order to anchor both economic stabilisation and financial market stabilisation in one law, the previous "Financial Market Stabilisation Fund Act (FMStFG)" was renamed "Act on the Establishment of a Financial Market Stabilisation Fund and an Economic Stabilisation Fund (Stabilisation Fund Act -StFG)" in accordance with Article 1 of the WStFG. The previous statutory provisions of the FMStFG were combined in the StFG into a Section 1 - Financial Market Stabilisation and supplemented by the newly included provisions on the ESF in a Section 2 - Economic Stabilisation.

The ESF is administered by the Federal Republic of Germany - Finance Agency. On behalf of the Federal Ministry of Finance, it also oversees the stabilisation measures granted by the ESF in the course of the coronavirus pandemic.

As a result of the energy crisis, the Federal government has assigned the ESF another function. Since November 2022, it also serves to finance measures to cushion the consequences of the energy crisis. The corresponding amendment to the Stabilisation Fund Act (StFG) came into force on 4 November 2022.

German and European Legal Framework for ESF in the context of the coronavirus pandemic

Legal framework for the ESF in the context of the energy crisis

Legal basis for financing measures resulting from the energy crisis is the third part of the Stabilisation Fund Act (StFG).

Instruments

The Fund was originally set up with a total volume of € 600 bn in the context of the coronavirus pandemic. As part of the ESF extension, this total volume was adjusted to € 250 bn as of 1 January 2022.

Components of ESF in the context of the coronavirus pandemic

Guarantee volume 
€ 100 bn
(originally € 400 bn)

Recapitalisation volume 
€ 50 bn
(originally € 100 bn)
Refinancing of KFW's special programmes € 100 bn
Assistance with refinancing on the banking and capital markets (bridging liquidity shortages)

Capital strenghtening via: 

  • Subordinatied loans
  • hybrid capital instruments, e.g. warrant bonds
  • silent parnerships with or without loss participation 
  • open (share) participation 

Refinancing of the KfW special programmes allocated by the Federal government

To finance the package of measures resulting from the energy crisis, the ESF was authorised in November 2022 to raise € 200 bn on the capital market to finance the measures planned by the German government to mitigate the consequences of the energy crisis in the years 2022 to 2024. The ESF will finance government programmes and measures as well as the loans to KfW in the context of the energy crisis. It will not provide own instruments, as previously in the course of the coronavirus pandemic. Expenditures by the Fund for measures under Section 26a of the StFG are limited until 30 June 2024.

Federal Ministry for Economic Affairs and Climate Action

Further information on Economic Stabilisation Fund is available from the Federal Ministry for Economic Affairs and Climate Action. Applications for guarantees and recapitalisations could be submitted to the Federal Ministry for Economic Affairs and Climate Action until the end of April 2022. The granting of stabilisation measures was possible until the end of June 2022.

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