EU unity disintegrates: Huge state aid row erupts between member states as Germany benefit

Source: EXPRESS
May 1 2020
By Joe Barnes

GERMANY has benefited from more than half the emergency state aid approved by the European Commission during the coronavirus pandemic.

Berlin, the European Union’s largest economy, has accounted for 52 percent of the total value of emergency coronavirus state aid handouts cleared by the bloc’s Brussels-based executive. The Commission relaxed its normally-strict state aid restrictions in March to allow EU27 governments to pump money into their ailing economies and companies damaged by the introduction of coronavirus lockdowns. Eurocrats have sanctioned more than £1.6 trillion worth of national schemes so far.

France and Italy share joint second place, each with 17 percent of the total allowed by the Commission.

Brussels has signaled it will allow governments to continue to make similar investments until at least the end of the year.

But some European capitals have complained about the amounts the cash-rich German government has been able to pump into its economy.

They fear the vast sums have handed Berlin an unfair advantage in the bloc’s single market, and the Commission’s relaxed attitude could even cause permanent distortions.

“There is clearly a risk of a breakdown of the internal market in Europe,” a senior Spanish government official told Reuters.

“Not all the countries of the internal market have access to this liquidity.

“Germany has deep pockets and can afford it.”

Berlin has issued government-backed loans to sports giant Adidas, holiday operator TUI and is in talks with national airline Lufthansa over a £7.8 billion rescue package.

Carlo Amati, of the Italian flight attendants union ANPAV, warned: “The state aid that some European countries are discussing with airlines risks distorting competition and creating benefits for some when the sector restarts.”

Ryanair’s chief executive Michael O’Leary has said he is preparing to challenge more than £26 billion handed to rival airlines in the European courts.

Commission executive vice-president Margrethe Vestager, the bloc’s competition boss, has insisted the suspension of state aid rules was “fully legitimate” to save jobs and businesses.

“There are differences in how much member states can spend depending on this fiscal space,” she said.

“But we preserve the single market because we really need the single market for our recovery.”

But EU officials have cast doubt on the Commission’s ability to protect the single market for significant distortions.

One source said: “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.”

Spain has called for EU leaders to consider the inequality generated by allowing cash-rich governments to pour cash into their economies.

While “increased flexibility for national responses is needed and welcome, it is vital to avoid this leading to a more unequal EU”, Madrid said in a note.

To restore the level playing field, the capital wants the bloc’s poorer countries to be compensated through the next seven-year budget.

Ana Botin, the head of Spanish bank Santander, said: “Europe needs more fiscal firepower and we need it now.”