Concept and legal foundations of the Economic Fund for Germany
Der Economic Fund for Germany is a government financing measure that typically serves to strengthen, stabilize, and restructure the German economy. Economic funds are usually established in response to exceptional macroeconomic situations—such as economic crises or pandemics—and are subject to a specific legal framework. Key importance is attached to federal regulations, budgetary law requirements, and subsidy law structures.
Definition and Objectives
The Economic Fund for Germany is generally set up as a special federal fund, separate from the regular budget, dedicated to purposes of particular relevance to economic policy. Its objectives are to ensure liquidity, preserve jobs, and stabilize economic performance. The focus is on companies of all sizes, with special attention to systemically important sectors of the economy.
Legal Foundations and Statutory Anchoring
Key Legal Texts
The legal establishment of an Economic Fund for Germany typically takes place through a distinct law—such as the Act on the Economic Stabilization Fund (WStFG). Additionally, the Budgetary Principles Act (HGrG), the Federal Budget Code (BHO), and European legal requirements, such as EU state aid law according to Articles 107 et seq. TFEU, apply.
Economic Stabilization Fund Act (WStFG)
The Economic Stabilization Fund Act, issued as a direct response to the COVID-19 pandemic, defines the framework, tasks, and administration of the Economic Fund for Germany. It regulates the purpose, funding instruments, eligibility requirements, control mechanisms, and repayment modalities.
Budgetary Law Requirements
The creation and management of a special fund are subject to specific budgetary regulations, notably:
- Sections 26, 27 Federal Budget Code (BHO): Establishment and management of special funds
- Approval and oversight rights of the German Bundestag
- Requirements for budgetary transparency and verification
European Legal Aspects
Since the granting of state aid or guarantees usually involves significant interference with competition, European state aid rules must be observed. Support measures require notification and approval from the European Commission to prevent inadmissible distortions of competition.
Structures and Committees
The administration of the Economic Fund for Germany generally lies with the Federal Ministry for Economic Affairs and Climate Action and the Federal Ministry of Finance. The operational implementation is often handled by commissioned institutions, including KfW (Kreditanstalt für Wiederaufbau). Supervisory and decision-making committees consist of representatives from the ministries and other authorities.
Funding Instruments and Measures
Financial Instruments
The Economic Fund for Germany employs a broad range of support instruments, including:
- Guarantees and warranties: Securing loans for companies vis-à-vis the lending banks.
- Recapitalization measures: Federal participation in the equity of companies in the form of silent or direct participations.
- Development loans: Granting of low-interest loans to secure liquidity.
Requirements and Application Procedure
Access to funds from the Economic Fund for Germany is tied to specific requirements:
- Proof of acute financing needs caused by external circumstances
- Economic viability and a sustainable business model
- Obligations of cooperation and disclosure on the part of applicants
- Reporting obligations to the supervisory committees
Compliance with state aid limits and, where applicable, the submission of a restructuring plan are further fundamental requirements.
Supervision, Control, and Transparency
Supervision and Control
The use of funds is subject to strict control mechanisms that include both parliamentary and executive elements:
- Reporting obligations to the Budget Committee of the German Bundestag
- Audit by the Federal Audit Office in accordance with Sections 111 et seq. BHO
- External and internal compliance checks to ensure proper use
Recovery and Liability
In cases of misuse or violation of funding conditions, the explicit recovery of the received funds is stipulated. The bases for liability are defined in the underlying act, as well as in subsidy notices and contracts. In addition, civil and criminal consequences may apply.
Relationship to Other Economic Special Funds
The Economic Fund for Germany must be distinguished from other, partly permanent, economic support instruments, such as the ERP Special Fund or similar state-level funds. The specific reason and purpose justifying its establishment are always paramount.
Effect, Evaluation, and Outlook
The legal effect of the Economic Fund for Germany extends to all companies and groups covered by the support, with their registered office or main activity in Germany. Regular evaluations by external reports and official audits serve to verify the accuracy of targeting, efficiency, and legal compliance. Statutory adjustments are possible, depending on the economic situation and experience in implementation.
Literature and Further Regulations
- Act on the Economic Stabilization Fund (WStFG)
- Federal Budget Code (BHO)
- Budgetary Principles Act (HGrG)
- European state aid requirements (TFEU Art. 107 et seq.)
- Annual reports of the Federal Ministry for Economic Affairs and Climate Action on the Economic Fund
The Economic Fund for Germany is a fundamental instrument of economic stabilization and, due to its scope and significance, is subject to a complex legal structure. Sustainable and clear regulations ensure the balance between economic support and protection of competition.
Frequently Asked Questions
What legal foundations govern the allocation of funds from the Economic Fund for Germany?
The legal allocation of funds from the Economic Fund for Germany is primarily based on special laws created specifically to address economic crises, including the Stabilization Fund Act (StFG) and supplementary regulations and administrative provisions. The main content of the rules can be found in Sections 1 et seq. StFG, which define the aims, tasks, and powers of the fund. These provisions in particular regulate the conditions under which support may be granted, the manner of federal participation, and the control mechanisms that are to be implemented. In addition, EU legal requirements, especially state aid regulations as laid down in Articles 107 et seq. of the Treaty on the Functioning of the European Union (TFEU), must be observed. These regulations limit the scope of action of national economic funds, particularly with respect to the prohibition of state aid, and regarding requirements for transparency and reporting. Furthermore, federal budgetary requirements of the Federal Budget Code and the principles of proper use of funds according to the Federal Budget Code are applicable. The specific structure of funding and support is also governed by subsidy law guidelines, which are issued and regularly updated by the respective federal ministries.
Who is eligible to apply according to legal requirements, and what evidence must be provided?
Eligibility to apply for funds from the Economic Fund for Germany is comprehensively regulated by law. In principle, companies with their registered office or main place of business in Germany that are demonstrably affected by an extraordinary economic disruption may apply. The exact definition of ‘affectedness’ is regularly specified in relevant statutory instruments, for example through thresholds for revenue losses, endangerment of employment, or the systemic relevance of the company. Extensive evidence must be provided with the application, notably disclosure of current annual financial statements, a forecast of economic development without support, and details of all previously received government aid (prohibition on cumulation). There are also documentation obligations pursuant to Section 8 StFG, so that the use of funds must remain fully traceable. As part of the application, the accuracy and completeness of the information must be confirmed either on oath or by a tax advisor.
What legal control and oversight mechanisms apply to the Economic Fund?
The Economic Fund is subject to a variety of control and oversight mechanisms to ensure the lawful use of funds. These include, firstly, parliamentary supervision by the Budget Committee of the German Bundestag, which, in accordance with Sections 10 and 11 StFG, must be routinely informed of all key processes. There is also an annual accounting and external audit by the Federal Audit Office, which also checks for compliance with EU requirements. Internally, an independent fund administration exists, with documentation and monitoring that stand up to audit. Violations of rules, such as misuse of funds, can, under Sections 13 et seq. StFG, lead to obligations to repay or criminal investigations.
What legal standards apply to the recovery of granted funds?
The recovery of funds granted from the Economic Fund for Germany is clearly regulated by law, in particular in Sections 12 to 14 StFG and the corresponding recovery notices of the fund administration. Recovery may take place if it subsequently emerges that the approval was based on incorrect information, the funding conditions are not (or no longer) met, or the funds are not used for their intended purpose. The associated administrative acts are issued as adverse administrative acts within the meaning of the Administrative Court Procedure Code (Section 35 VwVfG) and are subject to judicial review. In addition, recovery must include default interest, the amount and calculation methods of which are subject to the relevant regulations for awarding public subsidies. Besides civil claims, intentional deception may also result in criminal consequences, such as under Section 263 of the German Criminal Code (fraud).
How is the relationship of the Economic Fund to other state aid legally structured?
The relationship of the Economic Fund for Germany to other state aid is essentially determined according to state aid law. Pursuant to Article 107 TFEU, state aid may generally only be granted after prior approval by the European Commission and not cumulated, insofar as overlaps with EU state aid law exist. National regulations therefore include explicit exclusion criteria or upper funding limits in their terms. The cumulation requirement also includes a comprehensive disclosure obligation for applicants to exclude multiple funding. Each aid notice from the Economic Fund contains a resolutory condition that a breach of state aid rules leads to immediate repayment obligations. Cooperation with European supervisory authorities is also legally mandated, for example through notification and reporting obligations to the European Commission.
Who is legally liable for the improper use of funds and what sanctions may be imposed?
Legally, the applicant companies or their authorized representatives are primarily liable for the improper use of funds. Liability arises both from special statutory provisions of the StFG and from general civil or criminal law. In addition to civil recovery, administrative enforcement measures are possible, in particular the attachment or compulsory collection of assets (Section 18 Administrative Enforcement Act). Criminal liability may arise in particular under Section 263 of the Criminal Code (fraud), Section 264 StGB (subsidy fraud), and Section 266 StGB (breach of trust). In addition, violations may result in entry in the Competition Register, so that companies may be excluded from future public tenders. In serious cases, the sanctions also extend to the personal liability risks of company management.
