The European Union will soon decide on extending special state-aid measures beyond the December 31 deadline, which allowed more government support than its tough rulebook would normally allow, according to Bloomberg.
So far governments have pledged €3 trillion in subsidies to help economies weather the biggest economic storm since the great depression. Europe would do more harm than good if it turns off its state-aid taps too soon in the wake of the coronavirus pandemic, the region’s top subsidy enforcer warned.
Olivier Guersent, the head of the European Commission’s competition service, said that even firms that have weathered the storm without needing state handouts could still be dragged down if the rules are tightened before the crisis has abated.
“It would be a mistake to cut off the aid before it’s clear how well European countries are managing the spread of the virus or if a vaccine-resistant strain emerges. We all hoped that by this time we would know where it ends but we’re not out of the woods yet,” said Guersent in an interview.
Regulators have suggested a progressive phase-out to end many support programs by June next year. But officials are weighing government responses before publishing the new rules in the near future.
“While the EU will have to stop emergency liquidity and solvency support at some time, it could potentially allow governments more leeway to grant investment aid to spur health or other innovations,” said Guersent.
EU policymakers are separately weighing how to handle rules on debt and deficit limits going forward.