Net Employment Effect of a Rule Change in Hermes Coverage

In addition to their capacity to innovate, access to financing for export business is critical to the success of German firms in capturing international markets. To insure exporters against financing risks in high-growth, but high-risk countries, the German federal government provides export credit guarantees, or so called Hermes cover. Companies, however, must satisfy certain criteria in terms of a minimum share of German value creation. A new study by the Ifo Institute investigates the extent to which German exporters with a high share of foreign value creation create jobs in Germany; and whether raising the foreign value creation share limit in terms of entitlement to cover would trigger a change in the employment impact of Hermes cover. In fact, it emerges that the current coverage policy for Hermes cover is sufficiently flexible for the majority of companies, but that allowing a higher share of foreign value creation would create additional jobs in Germany and Europe.