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Coronavirus: Germany beefs up law to block foreign takeovers

Jill Petzinger
·Germany Correspondent, Yahoo Finance UK
·2-min read
German Chancellor Angela Merkel attends the weekly cabinet meeting of the German government at the chancellery in Berlin, on April 8, 2020, amidst the new coronavirus COVID-19 pandemic. - In order to slow down the spread of the coronavirus, the German government has considerably restricted public life and asked the citizens to stay at home. The new coronavirus COVID-19 causes mild or moderate symptoms for most people, but for some, especially older adults and people with existing health problems, it can cause more severe illness or death. (Photo by Markus Schreiber / POOL / AFP) (Photo by MARKUS SCHREIBER/POOL/AFP via Getty Images)
German chancellor Angela Merkel attends the weekly cabinet meeting at the chancellery in Berlin. (Markus Schreiber/AFP via Getty Images)

Germany approved changes (link in German) to its foreign investment law on Wednesday 8 April after ministers had warned that German companies could be the target of hostile foreign takeovers during the coronavirus pandemic.

The government will now be able to intervene earlier at a lower equity threshold to prevent or put on hold acquisitions from non-EU countries that could lead to "likely interference" in public order or security — before the law stated that a takeover had to pose an "actual risk."

The changes will allow the government more scope to protect key industries such as tech and robotics from strategic investments, such as from state-owned Chinese companies.

“As the current situation shows, we in Germany and Europe need to have our own competencies and technologies in certain areas,” said economy minister Peter Altmaier.

Markus Söder, the premier of the state of Bavaria, which is home to big brands like Siemens, Allianz, BMW and Audi last month called for foreign takeovers to be banned to protect domestic companies.

"If at the end of this crisis... almost the entire Bavarian and German economy is in foreign hands and we no longer have any control options, then it is not just a medical crisis," he said.

Read more: Coronavirus: German government fears hostile takeovers of weakened companies

Germany’s leading economic institutions today predicted that the country was facing its biggest quarterly slump since they began keeping accounts in 1970. The Ifo Institute for Economic research estimates that economic output will shrink by nearly 10% in the second quarter, and by 4.2% this year, as a result of the shutdown.

Berlin last month launched an ambitious €750bn (£661bn,$814bn) aid package, a majority of which goes towards helping companies survive during the coronavirus pandemic via loans and grants. It also lowered the bar for them to be granted “Kurzarbeit” or short-time work support for employees; the government pays between 60% and 67% of a worker’s salary for an agreed amount of time to avoid layoffs.