Recapitalisation as ‘last resort’ says EC
The European Commission has given the green light to countries struggling as a result of the Covid-19 crisis to recapitalise their companies “as a last resort.”
The new measure was suggested by the European Commission on Thursday and implies bending the rules so that EU states can give extraordinary financial support for companies “seriously affected” but only as a measure of “last resort”.
“The Commission proposes to extend the temporary application of state financial support even more, permitting member-states to allow the recapitalisation of companies that need it since such public measures can have a significant (unfair and negative) impact on competition within the single market” but only as “a last resort.”
All told, since mid March to date 43 packages of state aid have been authorised by Brussels which have resulted in 53 measures related to the pandemic, the vast majority of which is to provide liquidity to European companies.
These include state aid by Portuguese government with a €3Bn credit line for the restaurant, tourism and industry sectors, two regimes of state aid worth €13Bn in addition to a €20 million credit line for the fishing and aquaculture sector.
The concession comes after the head of the International Monetary Fund, Kristalina Georgieva warned that the coronavirus pandemic will turn global economic growth “sharply negative” this year and feared that the world faced the worst economic crisis since the Great Depression of the 1930s.
And after sixteen hours in a virtual meeting, EU finance ministers “achieved virtually nothing” according to one Spanish diplomat who spoke of an exhausting EU video conference reminiscent of the agonising negotiations during the Greek financial crisis.
This time, however, as a Danish diplomat noted, “a deep, deep recession is looming across the EU; it appears to be a financial crisis on steroids.”
While the proposal for mutualised debt in the form of Eurobonds has been ruled out by Germany, Austria and the Netherlands, a French idea where all 27 governments could access a recovery fund which can be paid back in the distant future is being discussed.