New fund to boost cash flow

The creation of the Guarantee Fund, which will be activated by the Development Ministry in early May to oversee the supply of state-guaranteed working capital of over 7 billion euros up until the end of 2020, marks the start of the economic recovery, through the direct injection of cash into medium-to-large and large businesses.

The ministerial decision for the creation of the new fund, which will be under the purview of the Development Bank, is expected to be signed this week by the ministers of Finance Christos Staikouras and Development Adonis Georgiadis, and his deputy Yiannis Tsakiris. This will then pave the way for the invitation of interest for banks to take part.

According to the blueprint of the decision, the loans that will be issued via the Guarantee Fund will be new money, as the Fund will operate according to strict European Union terms dictating the refinancing of existing loans. The Fund is at first endowed with resources of 1 billion euros from the Partnership Agreement for the Development Framework (known in Greece as ESPA); along with the funds the banks will invest, the total funding will reach up to 3.5 billion. Given the increased needs, the government has already secured the doubling of state support to 2 billion euros, aiming for loans to businesses through the Fund adding up to 7 billion euros by the end of the year.

The state will guarantee 80 percent of these loans, whose sum must not exceed 5 percent of the total portfolio of each bank participating in the program. The duration of the state collateral will be six years from the date on which the loan was issued and interest will be set by the banks.

The Development Ministry is also preparing the "Corporate Financing" initiative of the Entrepreneurship Fund II, which will be used to cover funding needs of over 500 million euros for small and medium-sized enterprises by subsidizing their rent, leveraging along with the participation of banks additional liquidity in excess of 1 billion euros.