Building European Champions: EU to Review State Aid Rules to Help Its Firms Compete with US & China

Written by | Wednesday, May 27th, 2020

Before the pandemic hit Europe, state aid – government financial help to homegrown firms – was very limited because Brussels believes it makes competition unfair in the single market. But, early in the crisis, the European Commission temporarily suspended the bloc’s strict rules so governments could help firms stave off the threat of collapse. Thus, as the latest in a line of rescue packages to help lockdown-hit airlines, the German government and flagship carrier Lufthansa have now reportedly reached an agreement on state aid totalling €9 billion. “Overall, it ensures that public support is limited in time and targeted only to the problems that companies are currently facing,” said Margrethe Vestager, the EC’s Executive Vice-President.
So far, Brussels has approved almost €2 trillion worth of national rescue schemes during the pandemic with Germany accounting for half of it. But this prompted concerns that countries with the deepest pockets are getting an unfair advantage. Among the most vocal opponents is none other than Ryanair CEO Michael O’Leary who blasted France and Germany for „creating a huge fund – billions of state aid – that will allow them to either low-cost sell against the likes of Ryanair during the recovery period or allow them to engage in mergers and acquisitions and buy up all their weaker competitors when this is over.” But German leaders see the country’s massive use of state aid as “a locomotive” for the EU’s economy in the recovery phase.
Some, such as Armin Laschet, State Premier of North Rhine-Westphalia, would like to see the EU to refocus and relax competition rules even in the future because, as he puts it, “the European competition and state aid rules should enable the creation of European corporate champions so that they can compete with rivals from the US and China.” Competition inside the Single Market should not be the only criterion for state aid, says Laschet, adding that “This will be the challenge in the next years.” And the issue of state aid and protection of strategically important the homegrown companies is currently high on the agenda also the UK capital London. Hence, British finance minister Rishi Sunak has just authorised a bailout plan to rescue companies that are seen as strategically important, with the Treasury saying it may step in to support crucial businesses, including in steel, aviation and aerospace sectors, whose failure would “disproportionately harm the economy”, after other options run out.

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