While EU member states are hardly allowed to support their companies financially in normal times, the coronavirus crisis has made state aid essential for the survival of most businesses. In a letter to Competition Commissioner Margrethe Vestager, Austria’s government called for the suspension of state aid law in sensitive areas. EURACTIV Germany reports.
The European Commission should relax its state aid rules so that states can support their companies more efficiently in the crisis. This was the demand made by the country’s two conservative ministers from ÖVP, Finance Minister Gernot Blümel and Economy Minister Margarete Schramböck at a press conference on Monday (20 April).
On Tuesday, the two detailed their demands in a letter addressed to Vestager, which was made available to EURACTIV.
Aid regulations should prevent states from supporting “their” companies with taxpayers’ money, for example by subsidising them, as this would lead to distortions of competition. States with budget surpluses, such as Germany for example, could pump the money into companies, which, in turn, could lower their prices and thus drive the competition to ruin.
Less competition means higher prices and less innovation in the long run, and state aid is therefore strictly regulated.
“Even greater flexibility”
During the coronavirus crisis, however, many companies are relying on state aid because they were closed down by law. This is why the Commission had relaxed the aid rules as early as 19 March with a “temporary framework for state aid”, which has been continuously expanded since.
Companies can thus temporarily receive direct subsidies of up to €800,000, as well as bank loan guarantees of up to 90%, tax deferrals and short-time work payments. However, with states having to notify the Commission of each measure, the government considers the process to be too long.
“In a crisis, we have to calculate in hours and days, not weeks,” Schramböck and Blümel wrote, adding that having to inform the Commission about every aid measure is a “significant administrative burden” because many questions have to be answered and documents have to be provided.
Although the two ministers explicitly thanked the Commission for approving both Austrian aid packages, they called for “a legal framework that allows for even greater flexibility”.
EU state aid law “not to be thrown overboard lightly
So-called “anti-crisis subsidies” are to be exempted from the ex-ante notification requirement, while other demands include an increase in the maximum limit for direct payments to small and medium-sized enterprises, “more flexible interpretations of the definitions” of potential aid recipients, a suspension of liability fees (which companies pay to be allowed to take out state-guaranteed loans) and permission to pay out additional aid to industries particularly affected by the crisis.
While this would not be a complete suspension of state aid law, it would significantly increase the risk of distorting competition, Günter Bauer, a lawyer and head of Wolf Theiss’ department for competition and antitrust law, told EURACTIV Germany.
He said it was “understandable that especially a state which seems to be coping comparably well with this crisis wants to support companies flexibly and quickly”.
Nevertheless, the law on state aid should “not be thrown overboard lightly” because, in the end, it protects companies from the competitive disadvantages caused by excessive state aid, i.e. one that does not comply with any legal framework. This is essential for the functioning of the European internal market.
And states could also use these temporary relaxations to go beyond providing necessary aid and promote their own companies beyond what is permitted.
A “somewhat strange” demand
However, the Commission promptly poured cold water on Austria’s request.
Already on Monday, right after the press conference and before the letter had even been sent, Commission spokeswoman Marianne Podestá said the Commission “did not comment” but made clear that “state aid is a cornerstone of the internal market and so are certainly fair competition conditions among market participants”.
After the government’s comment turned into an official government letter the following day, Martin Selmayer, Commission representative in Austria, called the demand “somewhat strange” during a press conference over Skype.
The Commission had already “made the rules as flexible as possible”. Since the outbreak of the pandemic, about 80 state measures had been “examined in no time”, and with completed notifications, it only took “a few days” until approval. In the case of Austria, this happened “extremely quickly”, said Selmayr.
Bauer also stressed that the Commission had already shown a great deal of flexibility and, to his knowledge, applications are approved very quickly, sometimes even over the weekend.
“Solidarity has many faces”
So far, only Austria has taken the initiative, Finance Minister Blümel said on Monday. However, Economy Minister Schramböck hinted that Scandinavian countries could support the demand, without going into more detail.
At the end of the letter, the two stressed that Austria had so far been “very flexible” and had agreed to EU support measures totalling more than €500 billion. In doing so, they had “significantly” moved away from their own original positions in order to enable a rapid implementation of the aid instruments, “in a spirit of solidarity”.
[Edited by Zoran Radosavljevic]