Germany distributes half of the State aid approved with the new European regulation

Brussels relaxed in March the requirements for States to distribute State aid. And hand in hand with this change, public money in support of the private sector comes out much happier than before. In just five months, the EU countries have launched subsidies, credits or guarantees regulated with the new rules for almost 741,000 million, according to data from the European Commission. And the country that has done it with the greatest power is Germany. 48.5% of the total would be support lines launched by the federal government or the länder regional. It is followed by France, with 22.6% of the total. Both capitals, Berlin and Paris, were the ones that put the most pressure on the Community Executive last autumn and winter to be allowed to distribute that money with fewer controls.

To defend a greater relaxation in the rules for distributing State aid —already lax since the pandemic—, the main argument put forward by its defenders —also the Spanish or Italian governments— was that the United States is going to distribute multimillion-dollar subsidies with the norm that was approved last summer that, in theory, was aimed at fighting inflation (IRA, for its acronym in English). So does China, and in a much less transparent way.

There are other reasons that overlapped with this first one: the transition towards a decarbonized economy requires huge amounts of investment (745,000 million a year, the Commission calculates), and this is going to weigh down the competitiveness of European companies compared to American, Chinese or Japanese, which would have the public impulse; the EU companies themselves would move their investments to where there was aid. And, of course, on top of these arguments we had to add the response to the energy crisis caused by the Russian invasion of Ukraine.

In response to all this —with the impulse of the EU leaders in the European Council—, the Commission approved in March a new regulation that has led to the fact that in a little less than five months, between March 9 and the first days of August, aid for 741,000 million euros has been budgeted with the approval of Brussels. An amount that far exceeds that launched in 2022 to rescue a public sector overwhelmed by the crisis unleashed by the aggression against Ukraine and the rise in prices: 672,000 million.

As specified by the European Executive, these amounts are not yet money spent. We will have to wait to know that information. And the difference can be considerable: of those almost 700,000 million approved until December 31, 2022, those granted then amounted to 93,599 million.

But what is known so far does show what effort the Twenty-seven are willing to make as a whole, to face the current situation, and that of each one of them, something that depends on the fiscal margin and the size of their economy. The answer to the first unknown —the one that involves the entire group— makes it clear that the final outlay can exceed everything spent on this type of measure in recent years: in 2020, when the pandemic broke out and the State came to the rescue of the economy, the total account (aid for covid-19 and ordinary) amounted to 320,000 million.

The individual response also helps to explain the positions that were held in the debate on regulatory reform. Germany and France, the staunchest defenders of relaxation, monopolize more than 70% of what was approved, a much higher percentage than what their gross domestic product weighs in the whole of the EU. Berlin and the länder Regional governments also have a long tradition in distributing aid to their companies, as shown by the EU statistical series. On the other hand, others such as Denmark or Finland have only accounted for 3.3% and 2.5% of the total, respectively.

For these two countries, as for Sweden or the Netherlands, there was a matter of principle in their misgivings about public aid to the private sector. And, in addition, also a question of size. The economy of the Nordic countries, no matter how healthy it is, and no matter how much fiscal space it has, as well as that of the other smaller states (the three Baltic republics, Luxembourg and Slovakia, to give a few examples), could never aspire to hand out aid like Berlin or Paris. And that posed a serious risk of breaking the single market, as they repeatedly warned throughout the process.

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