Arcandor nosedives

The economics ministry in Berlin said a government committee on Monday denied Arcandor's bid to receive loan guarantees worth 650 million euros ($900 million) to avoid bankruptcy.

Arcandor, which owns the Karstadt chain and a majority share of the Thomas Cook travel agency, had applied for state guarantees to help refinance loans by the end of the week.

Despite the government’s announcement, the ailing retailer still has a chance of gaining approval for its application for a 437 million euro emergency aid package from the state-owned development bank, KfW. Arcandor spokesman, Gerd Koslowksi said they would “wait for the decision” before taking any further steps.

However, should this bid also fail, Koslowski warned that the group would have to file for insolvency. Finance Minister Peer Steinbrueck also told public broadcaster ARD on Monday that "a bankruptcy is not totally excluded."

Merger talks

Berlin and the EU said that Arcandor does not fulfill important criteria for receiving state aid from a fund set up to help firms out of the country’s current economic slump. Companies applying for support must prove among other things that their predicament was precipated by the financial crisis. However, in the case of Arcandor analysts say it was already in trouble before the crisis unfolded.

German Economics Minister, Karl-Theodor zu Guttenberg has called for progress in merger talks between Arcandor and its rival, Metro Group, which owns the Kaufhof chain. Speaking in Munich, Guttenberg said not enough headway had been made over the weekend.

He said Arcandor should be given a “fair chance,” but added that any emergency aid was attacked to clear conditions. He called for the company to “continue with clear talks.”

Indeed, negotiations between the two parties broke down on Sunday. Arcandor says they are now back on track, but spokesman Koslowski said it takes time to talk through the details of a complex retail merger. “It can't just be done and dusted on a Sunday afternoon,” he said.

Arcandor employees carrying placards with the slogans “I am here to defend my job” or “56,000 jobs are at stake" demonstrated across Germany on Monday.

Arcandor shares nosedived in early trading on the Frankfurt stock exchange on Monday, losing a third of their value.