The Bavarian government said on Wednesday that representatives from the Federal government and the states of Bavaria and Saxony had agreed to provide Quelle with loans worth 50 million euros.

"This decision makes it clear that Quelle can continue," said Bavarian Finance Minister Georg Fahrenschon.

The proposed assistance still needs to be reviewed by the European Union's competition watch dog in Brussels, but Fahrenschon said "a start had been made."

The announcement was welcome news for the company's 8,000 employees, located mostly in Bavaria and Saxony.

That is, until Berlin cast doubt on the agreement.

Federal Finance Minister Peer Steinbrueck told a press conference later on Wednesday that Quelle would have to review its application for assistance. He gave the company until Tuesday to accept conditions in return for 25 million euros of federal funds.

He added that an inter-ministerial committee had rejected the idea of loan-guarantees for Quelle because the company was too indebted. Steinbrueck explained that direct loans would be preferable to the state, because it would be entitled to claw back money if Quelle entered insolvency.

Despite the mixed signals, Quelle's winter catalog, which features everything from underwear to washing machines, appears to have the go ahead.

The company was under pressure to meet a printing deadline, but Bavarian premier Horst Seehofer is expected to present a sample catalogue to printing contractors in a public display of confidence at Quelle's distribution headquarters in Nuremberg on Thursday.

Quelle's parent company, Arcandor, which also owns the Karstadt department store chain, declared bankruptcy earlier in June after failing to obtain 650 million euros in loan guarantees and 437 million euros in emergency credit from the federal government.

nw/Reuters/AP/AFP
Editor: Matt Hermann