Faced with the colossal impact of the coronavirus crisis, Berlin is not looking at the expense to come to the rescue of its flagships … made of a much larger public debt (France, Italy). “Right now, half of the state aid granted to European companies has been granted by Germany”, noted the head of European diplomacy Josep Borrell, during a recent discussion with a group of journalists including AFP.
“Aid is given by those who can do it. If one can give more than another, we are distorting conditions of competition. The single market will be strongly affected by the way aid State will be granted, “warned the former Spanish foreign minister. A paradoxical situation, because in normal times, Germany is much less inclined to subsidize its companies than is France of Colbertist tradition.
>> © All Rights Reserved – Germany could do well in the face of the crisis: the Stock Market Council of the day
But it is clear that it is far ahead of its 26 EU partners since the European Commission's decision in mid-March to be more flexible in terms of state aid. Out of a total of around 1,900 billion euros in aid approved by Brussels, Berlin has the lion's share with 52%, followed by France with 17%, then Italy with 16%.
If Germany injects 100 billion euros in aid into its companies and France only 20 billion, then “there is a risk of divergences on the internal market”, recently warned the European Commissioner for the internal market, Thierry Breton, former French Minister of Economy, in the columns of the Handelsblatt, German business daily. “We want the framework to apply uniformly, that is to say that we ensure that there are fair conditions on the internal market when operations are authorized” by Brussels, argued to Brussels from AFP a French source. A senior Spanish government official goes even further: “Germany has lots of money to finance its companies in need. And as it injects millions into them, the least we can do is to ask him to show solidarity with us. “
Asked last week by an Italian MEP about German spending, the European Commission's executive vice-president, Danish Margrethe Vestager, in charge of competition, defended Berlin. “It is important that Germany does this because it will somehow act as a locomotive for Europe.” While acknowledging: “what is sad is that not everyone has the same budgetary room for maneuver as Germany, we will have to find solutions”.
And in fact, Friday evening, the European Commission set strict conditions for European states to recapitalize their businesses. Among them, the ban on paying dividends or bonuses to managers. Companies will also not have the right to acquire a stake of more than 10% in competitors, suppliers or customers (as long as the State retains at least 75% of the shares acquired in response to the crisis). “Everything is done so that this recapitalization is the solution of last resort,” said Eric Paroche, lawyer specializing in competition matters at Hogan Lovells.
Any crisis can indeed be a boon for the most resilient firms: they can buy rivals at low cost, which causes a redistribution of cards. “But with this clause, the recapitalized company will be prevented from playing a role in the consolidation,” added Mr. Paroche. These new rules come as the first air transport group in Europe, the German Lufthansa, is discussing with the German State with a view to partial nationalization and aid of 9 billion euros to avoid bankruptcy. Also on the table of the German government, the multi-billion euro recapitalization of the railway group Deutsche Bahn.
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