The German economy is resisting the EU’s plans for a 30-day payment period in commercial transactions. Critics warn of rising financing costs, especially for small companies.
The German economy is resisting the EU Commission’s plans to introduce a uniform payment period of 30 days for all commercial transactions. “Financing costs are at risk of rising significantly, especially for small and medium-sized retailers,” warned the deputy managing director of the German Chamber of Commerce and Industry (DIHK), Achim Dercks.
The standard deadline for business transactions is currently 60 days, although individual agreements are possible. The regulation also means that retailers would only have 30 days to finance the procurement of goods. However, the goods often remain on the shelf for a longer period of time before they are sold.
Companies would then often have to temporarily finance the purchase of goods through short payment terms. “The resulting liquidity gaps often have to be covered by loans,” he explained.
The EU Commission sees late payments as a risk
With its new regulation, the EU Commission wants to combat payment delays and ensure that small and medium-sized companies do not get into financial difficulties. In times of crisis and turbulence, payment delays increase and pose a risk for many companies.
The plans, which also provide for reductions in bureaucracy and simplified taxation, were presented in mid-September. The proposals are still being negotiated with the EU states and the EU Parliament.
Federal Justice Minister Marco Buschmann (FDP) told the Funke media group that he was “very critical” of the changes planned by the Commission. “Rigid deadlines do not do justice to the different circumstances and leave too little room for contractual freedom for the economy,” he explained.
German trade association warns against rigid requirements
The proposal also does not sufficiently take into account the fact that companies are both creditors and debtors to the same extent, the house said. The regulation forces retailers to pre-finance the costs of procuring the goods, which can be a financial burden, especially if they are stored for longer periods.
It is commonplace for washing machines to be on the shelves in retail stores for longer than 30 days. “That is why it is essential for retailers to agree on a longer payment period for goods that remain in the store or in the warehouse for a longer period of time, because in this way they save high financing costs,” emphasized the managing director of the German Retail Association (HDE), Stefan Genth.
“Setting the payment deadlines rigidly at 30 days does not prevent unpunctual payments and therefore does not help anyone.” No new regulation is needed.