Cap in hand

Arcandor has stepped up pressure on the German government to lend it a helping hand. In interviews over the weekend, the heads of Arcandor and its Karstadt department store unit warned that without taxpayer assistance to the tune of 850 million euros ($1.2 billion) some 50,000 jobs would be threatened.

Arcandor runs not only the Karstadt department store chain, but also the mail-order retailer Quelle and the Thomas Cook travel company.

Bankruptcy threat

"There is no private economic solution. There is no alternative to state aid," Arcandor CEO Karl-Gerhard Eick told the Frankfurter Allgemeine Sonntagszeitung.

He repeated his demand for 650 million euros in loan guarantees and a 200-million-euro credit in Saturday's edition of the Bild newspaper. "Without guarantees we have to find a new route, and that could include bankruptcy," he told the paper.

Meanwhile, Karstadt CEO Stefan Herzberg told the Sunday edition of Bild: "The lives of more than 50,000 workers could be disrupted." Furthermore, he warned, a bankruptcy could have an effect on suppliers and ulitmately it could be "a catastrophe for Germany's downtown shopping zones."

Cool response from politicians

So far, politicians appear to be unmoved by the threats. To date, German Economics Minister Karl-Theodor zu Guttenberg has reacted cautiously to the Arcandor warnings. And Volker Kauder, a leading member of Chancellor Angela Merkel's Christian Democrats, rejected the notion of state aid for Karstadt, noting that the firm was already in trouble before the current banking crisis began.

Furthermore, one of Arcandor's competitors, Tengelmann, has loudly rejected the company's bid for public funding. In an interview with Wirtschaftswoche magazine, Tengelmann CEO Karl-Erivan Haub said state aid for Karstadt "would be a slap in the face for all the companies that had done a good management job" in the past.

Meanwhile, the Berliner Zeitung newspaper has also raised the question of whether Karstadt isn't simply stuck in financial turmoil of its own making. The paper said suppliers had already recalled wares due to lack of payment, and that employee pay is only secured through May.

Retailers suffering

Arcandor's Eick also rejected the idea of a recently discussed merger between Karstadt and Kaufhof, Germany's other major department store, saying it would be insufficient to prevent the collapse of Arcandor.

The merger is merely a poorly disguised attempt by Kaufhof to drive Karstadt into bankruptcy and to pick off individual Karstadt department stores, according to Eick.

Old-fashioned department stores have suffered from weak sales in Germany as consumers flock to superstores - which combine supermarkets with department stores - and shops run by retail clothing brands.

jen/dpa/Reuters

Editor: Chuck Penfold