Vestager: Discrepancy in state aid distorts single market, hampers recovery

Germany accounts for more than half of the emergency coronavirus state aid approved by the EU executive, prompting concerns that countries with the deepest pockets might be getting an unfair advantage in the bloc’s single market. #eudebates #coronavirusitalla #Covid_19 #coronavirus #CoronavirusOutbreak #Corona #COVD19 #Health #EUCO #COVID #Eurogroup #EXITstrategy #Economy #Eurobond #Eurobonds

In an interview with German newspaper Sueddeutsche Zeitung, Vestager said there was a risk that the different levels of state aid among member states would distort competition and slow the economic recovery from the coronavirus pandemic.

“And this has already happened to a certain extent”, Vestager said, according to a pre-released extract of the interview that the newspaper will publish in its Monday (18 May) edition.

Ensuring a competitive level playing field within its cherished single market of some 450 million people is a central EU tenet and has long been a key condition for opening up to foreign players from China to, more recently, Brexit Britain.

But the executive European Commission suspended the normally-strict state aid restrictions in mid-March, allowing the 27 EU states to pump cash into their economies and companies battered by coronavirus, with more than 1.9 trillion euros worth of national schemes approved so far.

Earlier this month, Vestager said that Germany’s extensive bailouts of coronavirus-hit companies could have a ripple effect across the bloc and work as a locomotive for Europe.

Asked about an EU recovery plan expected to be announced on 27 May, Vestager said there were no guarantees that it would be sufficient but said officials were trying to do their best.

“I cannot give a forecast of how member states will react to the draft,” she said, adding that she would not be surprised if the proposal sparked different opinions.

Germany’s massive use of state aid could serve as ‘locomotive,’ Vestager says

Germany’s decision to take full advantage of the EU’s relaxed state aid rules could be “a locomotive” for Europe but a strong recovery fund is needed to avoid distortions in the internal market, EU competition chief Margrethe Vestager told MEPs on Monday (4 May).

In mid-March, the European Commission announced a loosening of state aid restrictions, aimed at ensuring fair competition within the EU’s single market and allowing countries to pump money into companies heavily hit by the COVID-19 outbreak.

Ever since then, around 90 national schemes worth about €1.9 trillion in 26 out of the 27 member states have been approved according to the EU executive. However, uneven fiscal space in the bloc’s members has led to asymmetries in the use of this temporary measure.

Germany alone accounts for over half of the value of the state aid unleashed.

“Even in normal days, when we have strict state aid rules some member states have more fiscal space to use the rules and to help than others,” Vestager told the European Parliament’s internal market committee (IMCO).