EU state aid support gives countries more fiscal room
Tuesday, March 24, 2020
Subject
EU state aid rules.
Significance
The European Commission relaxed its state aid and competition rules on March 13 and 19 amid the extraordinary pressure on European economic performance resulting from COVID-19. This will give member states more tools to implement substantial fiscal packages to save economic sectors struggling as a result of COVID-19. However, in order to prevent richer countries gaining a competitive advantage, it has imposed strict measures on government-sponsored credit guarantees or interest rate subsidies.
Impacts
- Even a lifting of restrictions within a few weeks will not undo the damage caused already by disruptions to supply chains and labour.
- If social restrictions persist until mid-2020, further substantial state aid packages will be required for the second half of the year.
- Firms that were already struggling before COVID-19 will be restricted in terms of the amount of state aid they receive.
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