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Thank you for inviting me to be here with you today. It’s a pity that we can only be together via a screen. But it’s good that we still have this chance to meet, in spite of the physical distance that the coronavirus is forcing on us.
In Germany, in the year 1800, if you left your house and walked a few steps down the road, you would hit a customs post. Customs was everywhere, and it was in random roadside places, so that travellers and merchants lived in fear of an unexpected check.
This happened because Germany consisted of hundreds of kingdoms and microstates, each with its own customs rules. It’s not hard to guess the result: fragmented markets with high prices, dictated by local monopolists who could operate behind a shield of customs barriers. German businesses were uncompetitive and consumers paid a high cost.
In 1833, it all changed: the Zollverein was founded – the world’s first economic union of independent states, and many barriers were lifted. Under the Zollverein, German industry prospered and there was more wealth for investment – in education, infrastructure and the world’s first pension systems.
We have gone much further than the founders of the Zollverein could have dreamed possible. Our Single Market that ensures Europeans have the highest standards of living in the world. We have abolished customs barriers, built lasting bonds and developed a common currency.
This achievement is something we must never take for granted.
Concretely, that means we must safeguard the instruments that keep our Single Market strong.
State aid control is one of those instruments. Because we must not allow subsidies that artificially prop up national champions, to re-build those barriers to trade that our Single Market broke down. Take away those subsidies, and companies compete outside their home market on equal terms. The result is competition based on merit, efficiency and innovation.
The simple fact is, there are no quick fixes when it comes to being world class. If companies want to succeed on the global stage, the best training ground is a competitive and healthy Single Market. One with a level playing field.
And especially now, when the support and investment needs are huge, governments need to make best use of public resources, by investing where the private sector alone is not enough: things like charging infrastructure for electric cars or cutting edge innovation in microchips.
State aid rules can play a vital role in helping us get the most for our money – both to manage this crisis and to overcome it.
When COVID hit in March, businesses were forced to shutter almost overnight; entire sectors of the economy had to close down. It was clear that large scale intervention was necessary to avoid otherwise healthy firms collapsing, to preserve jobs and economic activity.
We had to react quickly – and we did. We adopted temporary State aid rules that enabled Member States to provide much needed support, but with conditions to preserve our Single Market.
This has meant a busy few months for all involved. In total, we have taken over 320 decisions approving over 380 national measures.
In Germany, we worked with the government to approve, within a matter of days, national schemes enabling direct grants and bridging loans for small and medium-sized businesses that were hardest hit. We approved investments in research and development activities needed for the production of crucial products to fight the coronavirus outbreak, such as medicines, vaccines, ventilators and protective clothing. In doing so, we set incentives for companies to cooperate cross-border.
And we assessed and approved the public recapitalisation of Lufthansa worth six billion euros, while preserving competition: as a result, Lufthansa committed to make available slots and other assets at its Frankfurt and Munich hub airports, where Lufthansa has significant market power. So that, when the markets stabilise again, competing carriers have the chance to enter those markets, ensuring fair prices and increased choice for European consumers.
Still, it’s right to ask: how long will this extraordinary situation continue? The fact is, the virus is dictating how fast we can return to normal, and as we have seen in recent days, the pandemic is far from over.
That is why we took the decision to prolong our temporary rules. They will continue until the end of June 2021, and for a further three months for recapitalisation support. And we have added a new type of measure to support uncovered fixed costs of businesses suffering from significant turnover losses.
This is the necessary response to the crisis we’re facing. But we have to watch out for the longer term consequences. We cannot afford an asymmetric recovery and risk even greater divergence within the Single Market. Because we can only recover strongly, if we recover together.
That’s complicated by the fact that there are huge differences in the ability of national budgets to respond to the crisis and help businesses. Of the around 3 trillion euros in aid approved to-date, more than half was approved in Germany, around 15% in each Italy and France, around 5% in Spain. These figures are based on the budgets Member States notified to the Commission when seeking approval under State aid rules and their official announcements.
But we also need to understand the effects on ground. That’s why we asked Member States how much aid was actually paid out, taking end of June as a first cut-off date. The replies from 24 Member States show that, of the 2.3 trillion euros in aid approved by then, around 346 billion euros was spent.
That’s quite a gap. For this, there may be many reasons. Companies may have applied for less aid than expected, or the take-up rate and implementation of the schemes may have been slower. Companies may have relied more on general measures, such as Kurzarbeit schemes that apply across the economy and do not amount to State aid. Or, the Member State’s own data may not be fully complete.
Looking at the situation across Member States, the responses show that France has disbursed the largest amount of aid, at just above a third of the total, followed by Germany at 28%. Spain makes up about one fifth and Italy about 8%.
So, the preliminary figures indicate that the actual gaps between aid spent by the larger Member States may not be as large as what they had initially announced – still, the fact remains that the four largest Member States make up over 90% of total State aid disbursed in the EU between March and end of June.
There are also other important differences in the way support was granted. France and Spain almost exclusively provided public guarantees at favourable terms, as did Sweden, Portugal and Romania. On the other hand, Germany and Italy, like Greece, Ireland and Poland, made more use of grants and other types of measures that do not have to be paid back, with potentially longer lasting effects on competition.
As said, this is only a first snapshot of State aid from Member States, gathered within a short amount of time. And given the timespan looked at, it does not reflect significant capital support schemes put in place in several Member States since then. For example, we have indications that the spending rate in Italy, albeit a bit slower at the beginning has taken up significantly afterwards.
So, we have put behind us the first kilometres but there’s a marathon ahead. This is not the time to jump to any conclusions. We will keep monitoring the situation and should have a better view, once the transparency obligations under our rules kick in, in a few months’ time.
But one important lesson that we can draw already is that we have to stay vigilant to protect the Single Market, and that there are hurdles to spending money effectively.
This is also true when we look ahead. To manage the recovery, we must be even more proactive.
First, this means enforcing our competition rules. After all, strong and competitive markets send the right price signals to tell us where investment should flow. Defending the Single Market, including through merger, antitrust and State aid control, leads to faster and stronger recovery.
Second, we have to be proactive on digital. COVID has accelerated trends we knew were coming. In the space of weeks, things like e-commerce, teleworking and distance learning took a leap forward. The digital transition is happening and we need to make sure it works for us – for example by investing in new skills and rural broadband, to close the digital divide.
Finally, we must be proactive on climate change. 2020 has shown the urgency: Wildfires sweeping Australia and the United States; droughts across the world and yet another record-breaking year for global temperatures.
We can manage all this at the same time: the health crisis, the twin transitions to green and digital, and a path to full recovery. But only if Europe acts as one – and across all policy areas; every oar has to be in the water, all pulling in the same direction.
State aid control is one of those oars. The European Recovery Plan includes a funding facility worth 672.5 billion euros in grants and loans. This is a huge opportunity to drive forward the digital and green transitions. To reap the full benefits of these investments, it is crucial that competition and State aid rules continue to do their part. To ensure that companies feel the need to innovate to survive; to avoid overcompensating companies; to ensure public money does not crowd out private spending.
With this in mind, we are preparing State aid guidance for Member States to invest in flagship areas. This includes improving the energy efficiency of buildings and deploying very high capacity networks where the market alone does not deliver.
Such templates can help Member States to design their measures so that they can be implemented directly, without need for notification to the Commission, either because they’re not aid or because they’re in line with block exemptions. And for measures that must be notified, we will assess and treat those cases as a matter of priority. We will also keep open channels of communication with national authorities, to help catch problems in ‘real time’.
Our work on the recovery plans goes hand-in-hand with a systematic review of key State aid rules to make sure they fully support the twin transitions to digital and green. That includes our rules on aid for energy and the environment, and for aid to the European regions that need support. It also includes the rules that deal with aid for research, development and innovation; for risk finance to support growing businesses; and for important projects of common European interest.
Our timetable on this is ambitious: We want to complete the review by the end of next year. The good news is, there is no need to reinvent the wheel. Today, we are publishing the results of the evaluation and feedback from stakeholders that show that overall, the current rules are working.
The evaluation does show that in some areas, rules will need to be updated. To take just one example: while we have taken several individual decisions, our rules do not include specific provisions for aid to develop networks of charging stations for electric cars. So, we want to add this to the toolbox to better enable Member States to support this transformation in a fair and open manner.
These efforts to ensure a level playing field within the Single Market only work if those outside Europe play fair. What happens when our companies compete with rivals benefiting from unchecked subsidies? We want our openness to remain a strength, but if foreign subsidies are distorting the Single Market, we need to respond.
In June, we published a White Paper on Foreign Subsidies. It identified existing tools and gaps to address distortive foreign subsidies. It set out three areas where foreign subsidies can play a harmful role in the Single Market: general market operations, foreign acquisition of EU companies and foreign subsidies in public procurement, with a procedure for investigations and redressive measures in each of these cases.
Our consultation closed in late September and we received a lot of support for legislative action. This tells us we are on the right path. But the consultation also underlines the importance of making sure that whatever we do on foreign subsidies, it is fair and proportionate, and that it fits in with the logic of our existing instruments. Alongside our openness, Europe’s greatest strength is that we abide by the sound principles of equity and proportionality.
The next step now is to prepare the ground for a legislative proposal in the coming year.
So, we have a lot to do. But big change can happen, when we work together. Success is never an automatic process. Rather, it is something we have to steer and guide, each step along the way.
With the green and digital transitions before us, the stakes really couldn’t be higher. Steering us to success now will mean using every instrument in our toolkit; whether that is to do with State aid, foreign subsidies or many other policy areas.
For a Europe that serves all European consumers and remains true to European values.