RO Govt. sets aside EUR 100 mln for trade credit guarantees

The Romanian Government approved, on July 31, a memorandum by which the Romanian Counter-Guarantee Fund is mandated to issue state guarantees in favor of the trade credit insurers, with a maximum budget of RON 500 million (just over EUR 100 mln).

The guarantees will cover up to 80% of the trade credit insured and unrecovered after the procedure of recovery of damages performed by the insurers.

The trade credit in Romania is RON 83 billion, compared to RON 33 bln working capital bank loans, according to Iancu Guda, head of the financial analysts' association AAFBR and head of services at Coface Romania. He concluded that such a guarantee scheme is vital for avoiding a liquidity crisis in Romania, Ziarul Financiar reported.

But the opposition Social Democratic Party (PSD) argues that the money will end in the hands of the (foreign) insurers.

"The Government has transferred half of a billion into these foreign insurers' accounts," PSD spokesperson Lucian Romascanu accused in a Facebook post quoted by News.ro.

In a column published in June, however, the prime minister's adviser Tanase Stamule explained that the final beneficiaries of the RON 500 mln are not the insurance firms but the Romanian companies that insure their trade credit.

By indeed playing the role of a reinsurance company, the Romanian Government offsets part of the cost of risk generated by the coronavirus pandemic and prevents a tighter approach of the insurers that would result in fewer companies (most creditworthy) being insured, Stamule explained.

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