Romania’s Government has drafted a new state aid scheme to lower the cost of financing for local companies, by subsidizing the differential between the higher interest rate of the corporate loans on the local market and the lower financing cost of European companies.
Based on current interest rates, the Government should cover at least 1pp of the interest paid by Romanian companies on euro-denominated loans while it remains unclear how would this apply to local currency loans.
“We came up with the idea to support the economic environment through a state aid scheme and subsidize, if one can say so, the difference between the average interest rates at the European level and those at the national level. It is right to give an equal chance, at least from this point of view, to Romanian companies compared to those outside Romania, from the European economic space,” finance minister Eugen Teodorovici explained, according to Profit.ro.
In the euro area, the interest rate on new loans of over EUR 1 million with a floating rate and an initial rate fixation period of up to three months stood at 1.13%, in February 2019, while the rate for new loans of the same size with an initial rate fixation period of over ten years was 1.80%. In Romania, in the same month, the interest rate on loans expressed in euro, larger than EUR 1 million with floating interest rate or initial rate fixation of under one year was 3.1% (2.7% in March). There were no loans extended with initial rate fixation period longer than one year. The cost of borrowing in local currency faced by Romanian companies is close to 6%.
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