European Commission refuses to
suspend State aid rules due to COVID-19
The European Commission has
rejected a request from Austria to pause EU State aid rules in the outbreak of
the coronavirus pandemic.
Austria urged the Commission
to relax the State aid rules on a blanket basis. It said that this would be helpful for
business at a time of economic crisis and where the strict application of State
aid rules presents an unnecessary and inflexible burden.
The Commission has said that
the current rules can be applied flexibly in a targeted manner while minimising
the risk of competitive distortion. In
March it adopted a temporary framework to allow member states to give up to EUR800,000
in aid to businesses without the need for an individual notification and the framework
has since been extended.
The Commission’s response is
not surprising. Similar requests for a
halt to State aid rules came during the 2008 financial crisis but were not
accepted. The Commission adopted similar
targeted measures for the financial sector as well as the real economy, but it
did not want to give a green light to member states to prop up ailing
industries that had no reasonable rescue prospects.
If the Commission were to
accede to Austria’s request, this would likely require additional legislation
to implement.
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