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Brussels wants to allow governments to make capital available to groups in crisis and become major shareholders. Among other things, Lufthansa could be affected.
No dividends, no bonds, no acquisitions: If the state helps a company with a capital injection in the Corona crisis and enters as a shareholder, it must meet strict conditions. The competition authorities of the EU Commission published rules over the weekend on how governments can support companies with capital and so-called subordinated loans, that is, particularly risky loans.
The Federal Government has reserved 100 billion euros in its new economic stabilization fund for such state participations; Among other things, an entry is being discussed with Lufthansa. This set of rules would apply to this.
The Brussels-based agency has already made it easier for governments to provide subsidies, guarantees and normal loans to industries affected by the pandemic. But for some companies that is not enough: they need more capital but cannot find investors. For this reason, the Commission is loosening its state aid rules and intends to allow governments, at least until the summer of 2021, to make capital available to groups in crisis and become major shareholders. In return, however, managers have to submit to strict requirements. The authority’s decision states that such capital injections “would severely distort competition between companies.”
Germany accounts for half of all approved subsidies. Critics consider this to be unfair
Banks that had been saved by capital injections during the financial crisis had to adhere to similar rules of conduct. However, the new regulations only target companies outside the financial sector. Compared to a previous draft, which is available in SZ, it was slightly mitigated: terms were extended, threshold values were increased. Governments had lobbied for this in the deliberations. However, the Commission continues to wear a tight corset. Approval is only possible if the company had no problems at the end of 2019; old cases should not be pimps.
And companies with the state on board are not allowed to pay dividends or buy back shares, except from the government. Manager bonuses are prohibited. As long as the state’s participation has not been significantly reduced, neither the competition nor the suppliers can be assumed. Only a maximum of ten percent is possible in other companies, unless the Commission decides that an acquisition from the other company is essential for survival. Aid recipients must also report on how their work meets important EU policy objectives, such as fighting climate change.
The government should receive adequate remuneration for its capital investment. The goal is a quick exit. If the government still owns at least 15 percent of the shares after six years, the commission wants to see a recovery plan. Margrethe Vestager, the commission’s vice president, says it is about “preserving European values and ensuring fair conditions of competition.”
However, there are doubts about the equity of state aid. To date, the Commission has approved more than 100 government requests for corona support packages. It is almost two trillion euros in grants, loans and guarantees. Half of the total corresponds only to Germany, while corporations in wet countries like Greece have to do with significantly less aid.
A commission spokeswoman says the differences between countries are “huge” and are likely related to the financial situation of governments. Agency representatives and southern European countries fear that companies in rich countries may weather the crisis much better than their rivals in poorer regions. It would distort competition and deepen the differences between economically strong and weak states. Preventing this is “vital to survival,” said Commission Vice President Valdis Dombrovskis. Therefore, the authority is considering its own capital injection aid program.
