Just days after introducing legislation that could shut down one of Hollywood's most lucrative sources of international film financing -- the German private investment funds -- the Berlin government h


(The Hollywood Reporter) -- Just days after introducing legislation that could shut down one of Hollywood's most lucrative sources of international film financing -- the German private investment funds -- the Berlin government has unveiled a new financing structure that could be a major boon to local producers but is unlikely to appease the U.S. majors.

The new proposal would see the German federal government set up a publicly-funded risk capital fund that would pump € 90 million ($117 million) into German productions over the next three years.

But this is only a fraction of the $1.7 billion the private investment funds raised last year for projects from big-budget spectaculars like "Alexander" through studio product such as "The Interpreter" to more modest indie efforts like "The Upside of Anger."

If the German government gets its way, the private funds look destined to become history. A law now before the German parliament would shut down the funds by closing the loophole that allows German taxpayers to write off investment in film funds, even if the money goes straight to Hollywood.

In place of the old private investment model, the new proposal would see the federal government set up its own fund, which would dole out capital to projects. Profits from resulting films would flow back into the fund to finance future projects.

Though details of the new structure still have to be worked out, members of the government working group told The Hollywood Reporter that the new fund would give guaranteed loans to film productions that qualify for a German certificate of origin by meeting minimum requirements of at least 10% local spend and having a German co-producer on board.

"This model is a startup financing structure that will replace the media funds because the media funds have become politically untenable," said Sytze van der Laan, head of German production giant Studio Hamburg Production. "The success will depend on our success as producers. If we don't deliver, this will be dead after three years. If we succeed, this will create a revolving risk capital fund for films that is exactly what the German industry needs."

For international producers in Cannes looking to set up deals with German cash on board, the big questions are who will qualify for this new funding and can $117 million over three years compensate for the loss of the more than $1 billion annually the film funds currently provide?

"It is going to be harder to find the money without the [investment] funds -- it doesn't help us if they change the law, that's for sure," said Avi Lerner, co-head of Millennium Films, who has used German fund cash to back such high-profile projects as Josh Hartnett/Scarlett Johansson starrer "The Black Dahlia" and "80 Minutes," featuring Al Pacino. "But we'll find a way to finance our films whatever happens. ... We'll just go wherever the money goes."

Henning Molfenter, managing director of Studio Babelsberg Motion Pictures, a co-producer on "Around the World In 80 Days" and the upcoming "V for Vendetta," said the new structure will not prevent big-budget Hollywood features from tapping German capital, pointing out that Babelsberg co-financed films like Ridley Scott's "Kingdom of Heaven" and Paul W.S. Anderson's "Alien Vs. Predator" both received German certificates of origin, even though neither film shot in Germany.

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