EU state aid plans will concern some trade partners

Subject

EU state aid.

Significance

The European Commission has approved more than EUR2.1tn (USD2.4tn) in state aid since March. This significant relaxation of state aid rules -- aimed at preventing businesses from collapsing and protecting them from foreign takeover -- could last for another year or two. At the same time, the Commission is preparing to bolster its scrutiny of aid by non-EU states which gives their firms a competitive advantage over EU ones.

Impacts

• After aviation, those sectors most in need of state aid are other transport sectors, hospitality and tourism.
• Richer EU countries’ ability to provide much more state aid to its firms will fuel a disjoined economic recovery across the euro-area.
• The EU’s crackdown on foreign subsidies will likely make it more difficult to reach a trade and investment partnership with China.