EU Urged to Turn Blind Eye to State Aid as Economic Crisis Looms
Austria Says EU Should Suspend State Aid Regime During Crisis
(Bloomberg) -- Austria urged the European Union to temporarily abandon its strict state-aid rulebook to avoid bureaucratic delays in government support for companies facing the worst slump since World War II.
Finance Minister Gernot Bluemel said the EU nations want to give support to companies risking financial ruin amid the coronavirus lockdowns -- not to give them an unfair advantage over foreign rivals. He said the EU vetting process for subsidies to make sure they don’t distort competition shouldn’t slow down that aid.
“We have put very many aid products on the table to save jobs at our companies,” Bluemel said. “We observe EU law and need to notify the commission about every single product, talk about it, answer questions, and that of course delays the process.”
Bluemel said it makes no sense that Austria was expected to support a relaxation of budget rules for cash-strapped EU nations while its domestic aid programs for local companies are still subjected to intense EU scrutiny.
Austria itself has pledged 38 billion euros ($41.3 billion) in aid in various forms, equivalent to around 10% of annual output.
“I don’t appreciate if we’re supporting other countries with Austrian tax money, while on the other hand we are forbidden to support our own companies with our own tax money,” Bluemel said. “We want to be able to show solidarity with our companies.”
European governments have already committed 3 trillion euros to cushion the blow from the pandemic, and “a lot more” will be needed, European Commission President Ursula von der Leyen said last week. The commission is working on a plan to expand the bloc’s budget to be “the mothership” of efforts to revive growth.
EU regulators relaxed strict state-aid rules in March to give governments “full flexibility” to support the economy after the coronavirus forced nations to shut down swathes of industry. That allowance covers grants for urgent liquidity needs and guarantees for bank loans. They allowed Austria a progam to guarantee as much as 100% of emergency bank loans last week.
While the commission declined to address his comments, spokeswoman Arianna Podesta said state aid rules were a “cornerstone” of the European Union and maintaining competition was “our greatest asset to weather this crisis.”
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