EU considers relaxing state aid rules in response to war
Bloc looks at measures to cushion impact of stopping business with Russia
The informal summit to be hosted by Emmanuel Macron, French president, in Paris this week was supposed to set the tone for a reset of the bloc’s fiscal rules, but instead is likely to revolve around measures to mitigate the impact of Russia’s war on EU economies. Options include a further relaxation of the bloc’s state aid rules — and possibly the reallocation of some of the bloc’s post-pandemic recovery fund.
Further punitive measures against Russia, including a ban on oil imports, are also being discussed, according to US secretary of state Antony Blinken. The analysis in the EU is that unlike gas, cutting off Russian oil would be easier to stomach for the bloc and hurt the Russian economy more, as Moscow’s oil revenues are more significant than the gas revenues.
“The question of oil and gas is clearly a central one,” said a senior French official, adding that discussions are looking at ways to stop energy prices from spiralling even higher and at how to manage stocks and supplies in the longer term.
Denmark meanwhile is having its own Germany-like policy U-turn, announcing a referendum that could result in the Nato and EU country annulling its opt-out from the EU’s defence and security policy. It’s the latest move by a Nordic country to beef up its defences in response to the war in Ukraine.
And we’ll also explore Turkey’s balancing act over Russia, after President Recep Tayyip Erdogan spoke to Vladimir Putin yesterday.
Subsidies galore
The EU is rushing to find ways to help companies hit hard by the wave of sanctions imposed on Russia — including by loosening state aid rules for the bloc, write Javier Espinoza and Sam Fleming in Brussels.
EU officials are in early discussions on relaxing state aid just as they sought ways of helping companies faced with plunging revenues during the coronavirus pandemic, according to people with direct knowledge of the plans.
A consultation with member states could start as soon as this week, though the timing of the consultation could still slip, these people warned, adding that plans were a “moving target”.
But an official briefed on the plans said the treaty already allowed compensation for damage from exceptional circumstances, with the Russian invasion of Ukraine seen as such a situation.
Margrethe Vestager, the EU commission’s executive vice-president in charge of competition, will be leading any potential changes to the rules.
The European Commission said: “The commission is closely monitoring the situation and is ready to use the full flexibility of its state aid toolbox in order to enable member states to support companies and sectors severely impacted by the current geopolitical developments.”
“We are looking at all tools at our disposal — permanent and temporary,” the commission said, adding that officials were mindful of the need to preserve the bloc’s level playing field and avoid distortions to competition.
As part of the options being discussed, member states could request quick approvals to use some of the money from the current EU budget to help these companies as officials sought to streamline the process in the same way they acted last summer during the devastating wildfires in Greece, a person said.
Brussels is also due to unveil a communication this week on how to diminish the bloc’s dependence on energy from Russia, with the bloc aiming to more than double the amount of gas in storage by next winter.
As a part of the draft proposals, EU officials will seek to use state aid to help companies negatively affected by soaring energy prices.
“EU state aid rules offer member states a wide range of possibilities for providing short-term relief to companies affected by the high energy prices, and to help reduce their exposure to energy price volatility in the medium to long-term,” a draft proposal seen by Europe Express said.
Separately, the EU is looking at ways of marshalling the €800bn Covid-19 recovery fund as part of the response to the crisis. One idea being discussed in member state capitals is to deploy recovery fund loans to underpin energy investments, as the commission seeks to wean itself off Russian gas exports.
Many member states still have capacity to request additional EU loans under the lending component of the NextGenerationEU programme — something the commission is likely to encourage them to do. The regulations also permit them to seek to amend their recovery plans in some situations — subject to EU approval.