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Germany accounts for more than a third of state aid in the EU

2022-10-04T11:32:45.738Z

"We use our economic strength to protect ourselves," argues the German Finance Minister, Christian Lindner, to defend his large aid plan of 200,000 million



The German aid plan of 200,000 million for families and companies to combat the energy crisis has raised many misgivings in several capitals and in Brussels.

Its large volume has attracted criticism, although Germany has always stood out as the country that distributes the most State aid among its companies, in times of crisis and in good times.

At first sight it is logical: it is the largest economy in the EU, it represents 25% of the community's GDP.

However, the aid distributed by Berlin far exceeds that percentage: 36% of all aid distributed in the European Union in 2020, according to data from the European Commission's Competition Department.

And if you add to that the large budget margin it has due to its comfortable fiscal situation,

The EU State aid report for 2020, the year of the outbreak of the pandemic, indicates that that year the Twenty-seven spent just over 320,000 million euros to support their companies.

If you add the United Kingdom, which was part of the EU until January 31 of that year, the account reaches more than 384,000 million.

This volume of aid is exceptional.

Two years ago, economic activity was restricted to stop the spread of the coronavirus and, to compensate, the economy of millions was flooded.

And, in fact, of that total amount, more than half (182,640 million) are part of the extraordinary support that was activated then and that led the Commission to relax the Competition rules to facilitate the rapid arrival of aid.

The cataract of data from that report leaves no room for doubt: Germany is the country of the Twenty-seven that gave the most aid, 36% of the total, and 35% if only those of covid-19 are taken into account.

If instead of using absolute data, the volume of aid is compared with the GDP of the corresponding country, other states such as Malta or Poland, which were close to 5% of GDP, exceed Germany, which was around 3.5% .

Poland, in fact, also stands out among the partners that usually distribute the most money in State aid, something that, as diplomatic sources point out, is closely related to the legal framework that facilitates the transition to a low-emissions economy, a challenge in that country, highly dependent on coal.

Facing these,

The German hegemony is not only left in what happened in 2020, but comes from behind.

The same report reviews all the money distributed since 2010: 1.38 billion (adding the United Kingdom), of which Berlin distributed 31%.

“Germany works a lot in this field in Brussels.

They coordinate.

Everyone says the same thing when they visit commissioners and officials: the Government, parliamentarians, businessmen, unions... They are a greased machine", explains Joaquín Almunia, who was Competition Commissioner between 2010 and 2014 and, therefore, maximum responsible for ensuring that State aid complies with Community rules.

tax margin

Almunia understands that Berlin is in a complicated situation, with an energy crisis that particularly affects it and, therefore, it has to respond with everything within its reach, among other things with that wide fiscal margin that having a public debt gives it 68% of GDP, a low bar when compared to Spain (115%) or Italy (152%).

Although he does add that the Germans "have to be more supportive so that the power they have does not distort the market."

And what does that mean?

“A second Recovery Fund.

The market creates differences for you and this can accentuate them.

We must review the cohesion policy, we can not continue basing ourselves on building highways and sports centers ".

Juan Delgado, director of the Games Economics competition affairs consultancy, emphasizes that the German role in supporting its companies is based on its fiscal strength and also on political will.

Although he admits that during the pandemic, the relaxation of regulations that existed has allowed "many things to come in."

And in this context, “Germany has taken great advantage of this framework and with direct aid.

Spain less, with support for financing, ICO aid and others”.

The will of which Delgado speaks was made clear on Monday in Luxembourg.

The German Finance Minister, Christian Lindner, has presented to his counterparts in the euro zone the plans presented on Thursday by the Government of which he is a part.

“We are not launching an economic stimulus package.

Germany is not stimulating demand.

We do not do business development.

We are reducing the ruinous prices, reaching their peak [...].

We have provided a very important financial volume until 2024, but it has the character of a defense umbrella.

[...].

We use our economic strength to protect ourselves”, he declared at the entrance of the Eurogroup meeting.

France calls for a joint response

In front of him, the Frenchman Bruno Le Maire, also upon his arrival in Luxembourg, responded with the example of what happened during the covid-19 crisis when asked if he believes that the German plan puts the market at risk unique.

“I want to give as an example what happened during the coronavirus crisis.

We are not satisfied with giving an answer here or there.

Together, let us define a European economic strategy, including joint debt issuance.

I am proposing it, in view of the energy crisis that is going to last, which is a matter of concern for each of our fellow European citizens, who are having difficulty making ends meet, which is a major concern for all our companies, for all our industries, which are beginning to decrease production:

Not only among the most pro-Europeans has the great German plan aroused suspicion, Eurosceptics have also taken advantage of the movement.

Hungarian Prime Minister Viktor Orbán has declared that “it was a bombshell when Germany announced that it was in a position to help its own companies with hundreds of millions of euros”.

Orbán has even spoken of "cannibalism", referring to a possible fragmentation of the single market.

"What Germany is saying to other countries is that they don't mind helping to clean up the mess left by an energy crisis in which it has a leading role," wrote Wolfgang Munchau, director of Eurointelligence.

“To avoid a major fracture in the EU, Scholz and his cabinet have three options: do a 180-degree turn and scrap the plan altogether;

make it very restrictive to drive a substantial reduction in demand;

or agree on a common tax proposal that allows other Member States to offer similar levels of support”.

An idea, this last one, that is closely linked to the approach of the article published in EL PAÍS by the curators Thierry Breton and Paolo Gentiloni.

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Source: elparis

All business articles on 2022-10-04

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