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Brussels closes open bar to bail out companies hit by pandemic

Latest NewsBrussels closes open bar to bail out companies hit by pandemic

A few months ago, Brussels sent a message stating that it was necessary to start withdrawing the emergency aid that companies receive to overcome the impact of the pandemic. And he is already taking action. On June 30, the relaxation of the state aid rule, which allowed member states to come to the aid of companies affected by the pandemic and its economic consequences, will end. This was announced on Thursday by vice president and competition commissioner Margrethe Vestager, who, however, specifies that the exit from this program will be gradual.

The measure, introduced in March 2020 in the early stages of the pandemic, has so far been extended every six months. And it has allowed the States to provide about three billion euros in aid, according to figures provided by Competition. However, by the middle of last year, only 750 billion of the total allowed potential would have been spent.

“Today, more than two years later, the health crisis in Europe has improved. With the gradual lifting of restrictive measures, the European economy has begun to take the first steps towards a way out of the health crisis. […] This easing of rules is a great relief for our economy as well, but it does not mean that we should not continue to be vigilant,” said the Danish Vice President.

The exit will be gradual. The Community Executive Committee will allow the existence of investment assistance until the end of this year and an injection for the solvency of companies until December 31, 2023, which is already provided for in the current extension. “These two tools are very important for launching the economy and attracting private investment. […] and therefore they must remain at the disposal of Member States longer than other measures,” Vestager abounds in a statement released this Thursday. In it, he also warns as an assurance that “the Commission will continue to closely monitor future developments and, if necessary, will again act quickly.”

The reference to the war on the EU’s eastern border in these words is clear and even unambiguous a few lines below: “While we continue to coordinate efforts to increase support for Ukraine and impose tough sanctions on Russia for its brutal war, we are also acting to mitigate the economic impact of this geopolitical crisis on companies and industries. Each crisis is unique and requires selective tools,” says Vestager.

The easing of competition rules did not consist of a transfer of funds from the EU to its member countries, unlike SURE (ERTE financing mechanism) or the Recovery Fund itself, which includes subsidies of hundreds of billions of euros. The measure allowed the States to bail out companies with lesser demands and scrutiny from Brussels when they were considered illegal support that violates equal opportunity in the free market.

He thoroughly knows all sides of the coin.

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In Spain, the tool was approved by the State Relief Fund, which came to the rescue of airlines such as Air Europa and Plus Ultra (a highly controversial case) or firms such as Duro Felguera. However, the procedures were slow, which meant that when the last extension, which ends on June 30, was approved, the Sociedad Estada de Participaciones Industriales, the body that was in charge of managing this aid in Spain, had about 50 applications for aid in the amount of 4,000 million euros are still unanswered. Among them were the steel company Celsa, the engineering company Técnicas Reunidas, Naviera Armas Transmediterránea, Air Nostrum or the hotel companies Hesperia and Room Mate.

Economic crises were not the only reason that prompted the EU to relax its strict competition rules. As well as the need to stimulate the semiconductor industry, in which Europe lags behind Asian countries such as China, Taiwan or the United States. To do this, he launched a $43 billion state aid plan, which is designed to help the continent regain lost ground in this sector, and this entails loosening the laws governing the market.

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Source: elpais.com

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