EU warning: Merkel’s state aid sparking competition in single market as states complain

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Germany’s rescue package for flagship carrier Lufthansa is a “very, very good solution” that is taking into account the needs of both the company and taxpayers, Finance Minister Olaf Scholz said on Monday. But German MP, Armin Laschet, warned the EU should be cooperating so, they can compete with rivals from the US and China. He explained competition within the single market will be a challenge for the EU in the next few years.

Mr Laschet told Euronews: “The European competition and state aid rules should enable the creation of European corporate champions so that they can compete with rivals from the US and China.

“Brussels should not look solely at competition inside the single market.

“This will be the challenge in the next years.”

Before the coronavirus pandemic, Brussels limited the amount of state aid EU countries could give to homegrown firms as it believed it makes the competition unfair in the single market.

But the bloc’s strict rules were suspended during the crisis to stop firms from collapsing.

This has resulted almost €2 trillion worth of national rescue schemes during the pandemic with Germany accounting for half of it.

Margrethe Vestager, the EC’s executive vice-president, said: “Overall, it ensures that public support is limited in time and targeted only to the problems that companies are currently facing.

“Liquidity support can be granted until the end of 2020 to help companies overcome liquidity shortages and to prevent layoffs.”

Ryanair CEO Michael O’Leary has been increasingly critical of the move which allows some countries an unfair advantage.

He told euronews: “What’s clearly happening is we have the French and the Germans creating a huge fund, billions of state aid, that will allow them to either low-cost sell against the likes of Ryanair during the recovery period or allow them to engage in mergers and acquisitions and buy up all their weaker competitors when this is over.”

Chancellor Angela Merkel told senior members of her party that the German government would not allow the European Commission to deprive Lufthansa of valuable take-off and landing slots at Frankfurt and Munich airports, Handelsblatt reported.

She said: “We won’t allow that to happen.”


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Lufthansa and the competition watchdog are discussing which slots at which airports Lufthansa will have to waive as a remedy to ensure competition is not hampered by the bailout, a person familiar with the matter told Reuters.

The largest German corporate rescue since the coronavirus crisis struck will see the government get a 20 percent stake, which could rise to 25 percent plus one share in the event of a takeover attempt, as it seeks to protect thousands of jobs.

Lufthansa has been locked in talks with Berlin for weeks over aid it needs to survive an expected protracted travel slump, with the airline wrangling over how much control to yield in return for financial support.

Germany’s central government has spent decades offloading stakes in companies, but remains a large shareholder in former state monopolies such as Deutsche Post and Deutsche Telekom.

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