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Ursula von der Leyen admitted that companies from rich countries, including Germany, have been given an unfair advantage by relaxing EU state aid rules as she called for an agreement on a pan-European rescue package.
In a speech to the European Parliament in Brussels, the president of the European Commission suggested that the single market was in danger of disintegrating as wealthier member states emerged from the current crisis.
Von der Leyen said: “What we are beginning to see now is a disorganization of the playing field in our single market. Therefore, in response, we must support those who need it most; we have to push for investment and reform. “
Brussels lifted EU-wide state aid restrictions on business subsidies in mid-March to allow governments to support big business.
Government subsidy rules are normally considered a fundamental part of the EU ecosystem, ensuring that governments cannot artificially support companies and “choose winners” in the European market. But the commission activated an escape clause as the analysis suggested that the EU economy would shrink by 7.5% in 2020 due to the coronavirus pandemic.
So far, the European Commission has approved more than € 1.9 billion in national spending plans, and Brussels recently announced that the temporary emergency regime would last at least until the end of the year.
Germany, whose economy accounts for about a quarter of the EU’s GDP, represents more than half of the state aid approved by the European Commission since the pandemic began. France and Italy account for around a fifth of that spending.
Last week, the commission’s spring forecast suggested that Germany would have a much less dramatic contraction in its economy than most other member states, and that it would recover more quickly, despite its expected economic downturn ( 6.5%) is the deepest in the country since the Second World War.
Greece’s gross domestic product is forecast to decline further, by 9.7%, due to the closure of its tourism industry. GDP in Italy and Spain are expected to contract 9.5% and 9.4%, respectively.
The EU’s heads of state and government commissioned the commission to design a rescue fund that can be used to help those countries least able to support their economies.
But there has been intense debate among the 27 member states on the issue. A key question is the balance between loans and grants. Spain and Italy, with the support of the French President, Emmanuel Macron, seek a high proportion of financial transfers.
In contrast, the Netherlands, Germany, and other northern European countries have argued that money cannot be given unconditionally, and that the emphasis should be on the cash that is returned over time.
EU economic commissioner Paolo Gentiloni, a former Italian prime minister, also warned of the risks of divergence among member states as they struggle to recover from the impact of their blockades. He said Wednesday that the risk of an uneven economic recovery posed an “existential threat” to the European Union.
