Business EU further loosens state aid rules

EU further loosens state aid rules

European countries are allowed, under strict conditions, to recapitalize their companies in difficulty because of the coronavirus crisis.

Brussels again temporarily relaxed its state aid rules on Friday, allowing European countries under strict conditions to recapitalize their businesses in difficulty because of the coronavirus crisis.

These new provisions are published while the first air transport group in Europe, the German Lufthansa, is in full discussion with the German State with a view to partial nationalization and aid of 9 billion euros to avoid bankruptcy due to the impact of the pandemic on its activities.

France was already authorized on Monday to support Air France with € 7 billion.

In mid-March, to cope with the economic shock caused by the containment measures, the European Commission had already announced a first series of measures, promising to be more flexible in terms of state aid.

The latter are normally allowed drop by drop by Brussels, in order to preserve competition within the European single market and not see uselessly subsidized lame ducks at the expense of other companies.

Friday evening, the European Commission enumerated a whole series of conditions to be fulfilled so that a State is authorized to bail out a national company by the means of a participation or a repurchase of shares or an increase of capital.

Among these conditions: the ban on paying dividends or bonuses to managers.

The European executive also insists that this aid must “be in the common interest, for example in order to avoid social difficulties and a market failure resulting from significant job losses, the exit from the market of a innovative business or a business of systemic importance or the risk of disruption to an important service ”.

Brussels is also encouraging the states to exit the capital of the bailout companies in the future: if it is still present after six years, the state must present a restructuring plan to the Commission.

The Commission also warns that companies already in difficulty on December 31, 2019 – so before the coronavirus crisis – will not be eligible for this temporary framework.

Since announcing greater flexibility in competition rules, Brussels has authorized state aid totaling around 1.9 trillion euros, according to a Commission spokesperson.

Germany leads with 52% of the authorized aid, then France with 17% and Italy with 16%.

This situation has already creaked the teeth of several officials from EU countries, angered by the fact that Germany was taking advantage of its fiscal space to support its companies at the expense of those of other less well-off countries. .

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