Germany Pushes EU to Double Aid Limit for Firms Hit by Covid

(Bloomberg) -- Germany wants the European Union to more than double the amount of aid that nations are allowed to dole out to individual companies as the coronavirus pandemic continues to wreak havoc across the region’s economy.

German Finance Minister Olaf Scholz and Economics Minister Peter Altmaier pleaded with the European Commission in a letter last week for an increase in the current limit of 3 million euros ($3.7 million), according to a person familiar with the discussions who spoke on condition of anonymity.

The pandemic has already forced the EU to sweep aside subsidy limits designed to avoid unfair competition between countries. But EU Competition Commissioner Margrethe Vestager has repeatedly voiced concern that Germany’s deeper pockets could risk further economic imbalances in Europe. Germany accounts for about half of the 3 trillion euros in virus aid pledged by all 27 EU governments.

The EU’s biggest economy is leading the push for a relaxation in the aid rules as Chancellor Angela Merkel seeks to regain a grip on the virus with a hard lockdown starting on Wednesday. Allowing extra state support is seen as vital to cushion the impact on thousands of companies facing up to a pandemic-induced recession.

Berlin officials are in intensive talks with Vestager’s team and seeking backing from other EU governments to increase the subsidy limits, the person said.

Economics Ministry spokeswoman Beate Baron said that finance and economics ministry staff are in “ongoing” talks with the commission to extend the limits for EU aid frameworks “upwards.”

These currently include a program setting a 3 million-euro limit on help with companies’ fixed costs and another, concerning small amounts of aid, that allows up to 1 million euros.

The European Commission said it’s assessing the need to adapt virus aid rules “in view of the developing situation while preserving the level playing field” for competition between companies in different countries.

Austrian Support

Austrian Finance Minister Gernot Bluemel has been in touch with Scholz and Altmaier to support the German push for higher limits, according to a spokesman.

Bluemel has been fighting with the commission for months about the limits to the state-aid measures. The country had asked for a cap of 5 million euros for the fixed-cost support.

Under pandemic rules, EU approval is needed to allow new aid to companies that have previously received state aid earlier this year.

Despite Vestager’s concerns over aid imbalances, the EU has shown signs it may budge. New winter lockdowns prompted officials to seek feedback about possible tweaks to state-aid rules last week, Vestager said at the European Parliament’s economy committee on Dec. 10.

“Right now things are looking pretty grim,” with economies suffering badly, she told lawmakers. “It will still take quite some time” before business activity recovers.

©2020 Bloomberg L.P.