Berlin/Frankfurt, May 27 - The German government is keeping an open mind about granting aid to stricken retail and tourism group Arcandor and will reach a decision soon, Economy Minister Karl-Theodor zu Guttenberg said.
Arcandor has long struggled to break even and been dragged deeper into crisis by the global recession, prompting its chief executive to warn that it could go bust within weeks if it did not get more than $1 billion in state aid.
The government has set up a 100 billion euro ($139.4 billion) fund to provide temporary aid to companies hit by financial turbulence, but helping Arcandor, whose troubles predate the crisis, is controversial ahead of a September election.
Guttenberg told about 5,000 Arcandor employees demonstrating in Berlin to support their company's call for help that the government would review Arcandor's request without prejudice.
German Finance Minister Peer Steinbrueck told a German TV station he had not ruled out state aid for Arcandor.
Politicians from ruling parties have criticised the request for support, saying the group's problems emerged before the financial crisis and were due to management mistakes.
Arcandor is in talks with Metro about merging their department stores and may face pressure to sell other assets such as its majority stake in travel group Thomas Cook but is running out of time.
It is in talks with banks to renew credit lines worth up to 710 million euros ($990 million) by June 12 and another 250 million euros by the end of September for which it needs the government's backing.
It has requested 650 million euros in loan guarantees and a 200 million euro loan from the state.
Arcandor pushed back its first-half earnings report a second time on Wednesday because of the ongoing talks and now plans to report on June 18 instead of on Friday.
The company is also making progress in talks with the owners of its department store properties to negotiate lower rent, a spokesman said.
The negotiations are part of Arcandor Chief Executive Karl-Gerhard Eick's five-year turnaround plan, which will see Arcandor move downmarket and hive off loss-making businesses.
Arcandor shares were up 12.6 percent at 1.96 euros at 1441 GMT, having fallen about 23 percent in the past five trading days. Market players took heart from the prospect of lower rent costs, traders said.