Loan guarantees from German states for NordLB

Two German states are planning loan guarantees ¤10 billion ($13 billion) a year for Norddeutsche Landesbank Girozentrale to urge the country's fourth-biggest state-owned bank to lend.

The prime ministers of Lower Saxony, home to carmaker Volkswagen AG and travel operator TUI AG, and Saxony-Anhalt agreed to provide the guarantees for the duration of the credit- market crisis, according to a joint statement from the two state governments.

“What matters especially in the current situation is to have a line for credits and guarantees ready for small and medium-sized companies,” the statement said. “Our economy needs affordable funding.”

Governments and central banks from the U.K. to Switzerland to the US are coming to the aid of lenders as the financial crisis batters economies. The bankruptcy of Lehman Brothers Holdings Inc. in September froze up credit markets and forced rivals including UBS AG of Zurich to accept government funds.

Backed by the state guarantees, NordLB is pondering to issue short-term and medium-term securities, a step that would "lastingly ensure" loan supplies to companies, according to the statement. The two states already informed Chancellor Angela Merkel's government about the guarantees and have also submitted the plans to the European Commission.