Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Campaigning Schr?der Defends MobilCom Aid

BRAUNSCHWEIG, Germany -- German Chancellor Gerhard Schr?der has launched a spirited defense of his decision to rescue struggling telecoms firm MobilCom AG.

Speaking at a campaign rally Monday in the central industrial town of Braunschweig, Schr?der said governments are obligated to try to find ways to help healthy companies like MobilCom when they run into difficulties.

"The economy is there for the people and people are not there for the economy," Schr?der said to loud applause.

"I worked yesterday and into the night last night to find a way to save MobilCom," he added. "Those who say it was a mistake should go there and look into the faces of the workers there and tell them the government shouldn't interfere."

Schr?der played the industrial savior once again, presiding over a 400 million euro ($391 million) bailout of stricken MobilCom, in a bid to prevent the loss of up to 5,500 jobs six days before a general election. The soft loans from state banks are needed after France Telecom cut off vital funding last week.

For some economists and many in the financial markets, the government's aid package mark a disturbing return to a tradition of throwing a lifeline to collapsing firms even when it makes little economic sense.

But Schr?der said the government had a duty to help companies like MobilCom.

Schr?der's conservative opponent in the Sept. 22 election, Edmund Stoiber, said he would also have taken steps to help the company. But the Bavarian state premier said the government had caused the crisis by extracting too high a price in its auction of new generation 3G or UMTS licenses in 2000.

MobilCom said the government-backed rescue deal had averted the immediate danger of an insolvency threatening thousands of jobs less than a week before the election.

However, chief executive Thorsten Grenz said a restructuring plan could still lead to several hundred job losses.

The move triggered a demand for notification of the plan from the European Commission under rules restricting state aid to industry, although the government insisted it did not have to inform Brussels as the rescue was funded by bank credits.

"Naturally not everything one tries succeeds," Schr?der said. "But it is not my style to refrain from trying because of abstract reasons."

The fate of building giant Philipp Holzmann, dramatically saved from collapse in 1999 in a deal brokered by Schr?der, seemed earlier this year to have taught the government a lesson.

When the firm was teetering on the brink of collapse again in March, Schr?der let it become one of Germany's biggest ever corporate failures, realizing it had turned into more of a political liability than a potential vote-winner.