BERLIN — Time is running out for Arcandor, the parent company of troubled German department store Karstadt, after the German government delayed a decision on state aid.

This story first appeared in the May 26, 2009 issue of WWD. Subscribe Today.

Government officials here said Monday they want more details about a possible merger between the department stores chain and rival retailer Metro, and that a decision on whether to grant Arcandor state aid, which had been expected this week, now looks unlikely.

Arcandor had hoped that a state guarantee of 630 million euros, or $882 million at current exchange, would help refinance its credit lines by June 12. Arcandor’s chief executive, Karl-Gerhard Eick, Monday reiterated that if the state doesn’t come to the rescue within the next three weeks, the company will go under. Arcandor’s stock prices fell more than a quarter on Monday morning following Eick’s comments.

Last week, Metro called for a merger between Arcandor’s department stores Karstadt and its own chain, Kaufhof, to bring together 247 stores under the new name of Deutsche Warenhaus AG, or German Department Store Inc.

Up to 10,000 jobs are at stake, and with a general election in September, the government will have to tread carefully. But ministers have expressed doubts about bailing out a company which was already experiencing problems before the financial crisis.

Arcandor has said that with or without the merger, state aid is still urgently needed. According to Eick, a loan guarantee, which the group would pay interest on, would cost German taxpayers less than an insolvency involving thousands of redundancies.

In addition to the Karstadt stores, Arcandor owns mail-order unit Primondo and the Thomas Cook travel business.