Virus Aid Weighs on EU Market Competition

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, Reuters reports.

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 ($2.1 trillion) worth of national schemes approved so far.

It is not an even game, however, as richer or less indebted states have more scope to channel funds.

While Germany makes up for about a quarter of the EU’s GDP, it accounts for some 52% of the total value of the emergency coronavirus state aid cleared so far, Commission data shows.

France and Italy share joint second place, each with 17% of the total, and the Commission plans to maintain its hands-off approach till at least the end of 2020.

The Commission’s competition chief, Margrethe Vestager said on Wednesday the suspension of usual state aid rules was “fully legitimate” now to save jobs and businesses and that competition distortions were kept to a minimum.

“There are differences in how much member states can spend depending on their fiscal space,” she told a virtual debate. “But… we preserve the single market because we really need the single market for our recovery.”

An EU official, speaking on condition of anonymity, was more frank: “… if you look at the scale of what Germany in particular, but also some others, are doing – any notion of level playing field or single market integrity has gone out of the window.”

That underpins the ailing south’s demand for joint EU financing to spur a recovery. Otherwise, they fear, not only will they have suffered more severely in the health crisis but will also take longer to get their economies back on track, Reuters adds.

With euro zone preliminary data showing an economic contraction of 3.8 percent in the first quarter of 2020, the EU is considering issuing debt by the Commission to raise more funds to help member states kickstart growth in 2021-22.

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