As the Deputy will be aware, the Taoiseach mentioned in this House shortly before the recess that he had held discussions with Chancellor Merkel on finding ways to reinforce Ireland’s economic recovery by improving funding mechanisms for the real economy, including access to finance for Irish SMEs. The German Government has asked KfW, the German development bank, to work with the German and Irish authorities swiftly, in order to deliver on this initiative at the earliest possible date.
Officials at my Department with assistance from staff of the NPRF have worked quickly to investigate ways to ensure that the benefit of this cooperation to Irish SMEs can be maximised.
A small party of my officials travelled to a meeting with their counterparts in Berlin in early December and a week later a similar meeting was held at KfW’s headquarters in Frankfurt. Officials from KfW and the German Ministry have also met with the project team from Ireland in Dublin for a further exchange shortly before Christmas. Both sides have been represented at senior management level for each engagement.
In addition, there have been regular conference calls between the parties.
As the Deputy may be aware, KfW channel their funding for SMEs in Germany through a system of on-lending using commercial banks in Germany as the distribution mechanism. Typically the SMEs can avail of KfW funding at different terms and conditions applicable to that offered directly by the financial institutions. This model is similar to the on lending arrangements available to Irish domestic institutions using funds from the European Investment Bank. The precise arrangements for the structure, level of funding and distribution options are the subject of the discussions between the relevant officials at present and will have to adhere to EU State Aid considerations. Experience in other countries suggests that any lending facilitated by a state investment institution like KfW is generally complementary to lending already taking place in an economy and can in fact assist commercial banks with access to more effective credit lines.