It is a bit rich that EU negotiators continue to make a UK trade deal conditional on British subservience to EU state aid rules
Source - Daily Telegraph - 21/6/20
https://www.telegraph.co.uk/business/2020/06/21/europes-double-standards-state-aid-put-britain-difficult-place/?WT.mc_id=e_DM1259054&WT.tsrc=email&etype=Edi_Edi_New_Sub&utmsource=email&utm_medium=Edi_Edi_New_Sub20200622&utm_campaign=DM1259054
Europe's single market, it is often observed, is essentially a British, or even “Thatcherite”, invention. Trade cannot be merely tariff and quota free if it is to be fair. It must also have common rules, standards and mechanisms to ensure maintenance of a level playing field.
Britain led from the front in making this vision a reality in Europe; the European Commission’s state aid and competition laws were virtually written by British civil servants, and ever since, the UK has been a prime mover in ensuring they are upheld, not always successfully, it ought to be said.
As Britain prepares to leave Europe’s single market, what we seem to be witnessing is what Michael Burleigh, director of the consultancy Sea Change, has called “the end of the Thatcherite era in Europe”.
Yet it is not so much Britain’s departure from the EU, and the UK’s consequent loss of influence in Europe, which is killing it off as our old friend Covid-19.
The pandemic has opened the flood gates for state aid in European economies on a hitherto unprecedented scale. France’s president Macron has said that not a single French job or company will be lost as a result of the outbreak, and he appears to mean it. Germany has adopted a similar stance.
Germany has shown no hesitation in rushing to give state aid to some of its ailing industries.B here’s the irony; Britain is heading in exactly the same direction. If the UK is leaving the EU in order to pursue its own course, including the right to intervene more actively in its own economy, it need hardly have bothered. Europe’s interventionist instincts are back in the driving seat as rarely before, both at a national and supranational level.
This change does admittedly pre-date Covid. Heavily state subsidised Chinese competition has forced all economies to rethink their approach to economic management, encouraging the shift to more interventionist strategies.
The pendulum was swinging strongly against the old, let the markets decide, school of thought from long before the pandemic. But it is Covid that has given it the final push; the panicked response to Covid has required previously undreamt of levels of compensating state intervention; for the moment, we are in effect a nationalised economy.
One cannot help but think that this change in approach might have been a factor in Andrew Tyrie’s out of the blue announcement last week that he is quitting three years early as chairman of Britain’s Competition and Markets Authority.
If you are about to embark on a more dirigiste approach to economic management, you need a compliant voice running your competition authority.
Tyrie is not that man. He took the job on the understanding that the authority’s antitrust powers would be beefed up, and indeed at the Government’s own asking, set out a comprehensive list of proposals for doing so. Since then he has heard nothing back.
Back on the Continent we are seeing a cynical use of Covid as an excuse for cementing and enhancing already economically dominant positions. State aid rules have more or less been suspended for the duration of the crisis; the European Commission rubber stamps just about any request made, unless of course it happens to be from the departing UK, in which case rather greater scrutiny is vindictively applied.
Those that can afford it are splashing the cash. According to the Commission’s own analysis, Germany accounts for more than half of all state aid approved during the crisis, roughly double its share of the EU economy. Next comes France.
At the time of the analysis Britain accounted for no more than 4pc of approvals, though this appears not to include the furloughed workers scheme, by far the largest element of Britain’s coronavirus business support package.
In unguarded comments, Carsten Spohr, Luftahansa’s chief, admitted that the airline’s €9bn (£8bn) bailout was larger than the company needed to survive, and was actually more designed to ensure that it maintained its globally leading position, for which read making it match fit to hoover up distressed rivals.
What is true of state aid is also the case in Germany’s wider Covid response. In terms of deaths per capita, Germany is one of the least affected by the disease. As one of the first out of lockdown, its economy has also emerged comparatively unscathed.
But that hasn’t stopped the Merkel government from announcing a post-Covid stimulus package worth over half annual GDP. Germany will emerge from the pandemic even more economically dominant within Europe than it was before.
This possibly explains Merkel’s support for a €500bn European Commission recovery fund. Agreement to dole out the money by way of grants, rather than as conditional loans, crosses an important line for Berlin.
In combination with debt and tax raising powers, the fund amounts to a form of fiscal transfer, something hitherto vehemently opposed by Germany. The proposal still faces pushback from the so-called “frugal four”, led by Holland’s Mark Rutte, but I imagine that it will go through in some form.
For the solvent North, this is not just guilt money, but a way of shoring up a single market increasingly shot through with competitive distortions and trading imbalances. With its love of national champions and its interventionist traditions, France has never been a fan of the “Thatcherite” single market. Nothing would please Macron more than to see it reborn in France’s own dirigiste image.
Germany’s position is a more nuanced one – reluctant acknowledgement that Covid is forcing Europe into a different approach to state aid. Berlin nonetheless seems more than happy to capitalise on its own solvency to further strengthen its industrial clout.
Embarrassingly for the EU, Covid has brought out an unseemly “everyman for himself mentality” among states, of which the greatest offender of the lot is Germany, first with its initial refusal to share medical supplies with Italy, and now in saving its own economy.
In taking baby steps towards the previously unconscionable idea of a transfer union, Germany is offering a kind of recompense.
But is it enough to save Europe’s single market from further rupture? If Germany is allowed to subsidise all it likes, it undermines the whole “level playing field” purpose of what’s meant to be the world’s most perfect free trade zone, and makes it into something quite different.
It is a bit rich that EU negotiators continue to make a meaningful trade deal with the UK conditional on British subservience to EU state aid rules. State aid is being thrown around like confetti within the EU’s own borders, but Brussels seemingly wants to deny that option among those it trades with externally. Global Britain is a noble ambition, but it is not one a fast deglobalising world seems minded to accommodate.
Source - Daily Telegraph - 21/6/20
https://www.telegraph.co.uk/business/2020/06/21/europes-double-standards-state-aid-put-britain-difficult-place/?WT.mc_id=e_DM1259054&WT.tsrc=email&etype=Edi_Edi_New_Sub&utmsource=email&utm_medium=Edi_Edi_New_Sub20200622&utm_campaign=DM1259054
Europe's single market, it is often observed, is essentially a British, or even “Thatcherite”, invention. Trade cannot be merely tariff and quota free if it is to be fair. It must also have common rules, standards and mechanisms to ensure maintenance of a level playing field.
Britain led from the front in making this vision a reality in Europe; the European Commission’s state aid and competition laws were virtually written by British civil servants, and ever since, the UK has been a prime mover in ensuring they are upheld, not always successfully, it ought to be said.
As Britain prepares to leave Europe’s single market, what we seem to be witnessing is what Michael Burleigh, director of the consultancy Sea Change, has called “the end of the Thatcherite era in Europe”.
Yet it is not so much Britain’s departure from the EU, and the UK’s consequent loss of influence in Europe, which is killing it off as our old friend Covid-19.
The pandemic has opened the flood gates for state aid in European economies on a hitherto unprecedented scale. France’s president Macron has said that not a single French job or company will be lost as a result of the outbreak, and he appears to mean it. Germany has adopted a similar stance.
Germany has shown no hesitation in rushing to give state aid to some of its ailing industries.B here’s the irony; Britain is heading in exactly the same direction. If the UK is leaving the EU in order to pursue its own course, including the right to intervene more actively in its own economy, it need hardly have bothered. Europe’s interventionist instincts are back in the driving seat as rarely before, both at a national and supranational level.
This change does admittedly pre-date Covid. Heavily state subsidised Chinese competition has forced all economies to rethink their approach to economic management, encouraging the shift to more interventionist strategies.
The pendulum was swinging strongly against the old, let the markets decide, school of thought from long before the pandemic. But it is Covid that has given it the final push; the panicked response to Covid has required previously undreamt of levels of compensating state intervention; for the moment, we are in effect a nationalised economy.
One cannot help but think that this change in approach might have been a factor in Andrew Tyrie’s out of the blue announcement last week that he is quitting three years early as chairman of Britain’s Competition and Markets Authority.
If you are about to embark on a more dirigiste approach to economic management, you need a compliant voice running your competition authority.
Tyrie is not that man. He took the job on the understanding that the authority’s antitrust powers would be beefed up, and indeed at the Government’s own asking, set out a comprehensive list of proposals for doing so. Since then he has heard nothing back.
Back on the Continent we are seeing a cynical use of Covid as an excuse for cementing and enhancing already economically dominant positions. State aid rules have more or less been suspended for the duration of the crisis; the European Commission rubber stamps just about any request made, unless of course it happens to be from the departing UK, in which case rather greater scrutiny is vindictively applied.
Those that can afford it are splashing the cash. According to the Commission’s own analysis, Germany accounts for more than half of all state aid approved during the crisis, roughly double its share of the EU economy. Next comes France.
At the time of the analysis Britain accounted for no more than 4pc of approvals, though this appears not to include the furloughed workers scheme, by far the largest element of Britain’s coronavirus business support package.
In unguarded comments, Carsten Spohr, Luftahansa’s chief, admitted that the airline’s €9bn (£8bn) bailout was larger than the company needed to survive, and was actually more designed to ensure that it maintained its globally leading position, for which read making it match fit to hoover up distressed rivals.
What is true of state aid is also the case in Germany’s wider Covid response. In terms of deaths per capita, Germany is one of the least affected by the disease. As one of the first out of lockdown, its economy has also emerged comparatively unscathed.
But that hasn’t stopped the Merkel government from announcing a post-Covid stimulus package worth over half annual GDP. Germany will emerge from the pandemic even more economically dominant within Europe than it was before.
This possibly explains Merkel’s support for a €500bn European Commission recovery fund. Agreement to dole out the money by way of grants, rather than as conditional loans, crosses an important line for Berlin.
In combination with debt and tax raising powers, the fund amounts to a form of fiscal transfer, something hitherto vehemently opposed by Germany. The proposal still faces pushback from the so-called “frugal four”, led by Holland’s Mark Rutte, but I imagine that it will go through in some form.
For the solvent North, this is not just guilt money, but a way of shoring up a single market increasingly shot through with competitive distortions and trading imbalances. With its love of national champions and its interventionist traditions, France has never been a fan of the “Thatcherite” single market. Nothing would please Macron more than to see it reborn in France’s own dirigiste image.
Germany’s position is a more nuanced one – reluctant acknowledgement that Covid is forcing Europe into a different approach to state aid. Berlin nonetheless seems more than happy to capitalise on its own solvency to further strengthen its industrial clout.
Embarrassingly for the EU, Covid has brought out an unseemly “everyman for himself mentality” among states, of which the greatest offender of the lot is Germany, first with its initial refusal to share medical supplies with Italy, and now in saving its own economy.
In taking baby steps towards the previously unconscionable idea of a transfer union, Germany is offering a kind of recompense.
But is it enough to save Europe’s single market from further rupture? If Germany is allowed to subsidise all it likes, it undermines the whole “level playing field” purpose of what’s meant to be the world’s most perfect free trade zone, and makes it into something quite different.
It is a bit rich that EU negotiators continue to make a meaningful trade deal with the UK conditional on British subservience to EU state aid rules. State aid is being thrown around like confetti within the EU’s own borders, but Brussels seemingly wants to deny that option among those it trades with externally. Global Britain is a noble ambition, but it is not one a fast deglobalising world seems minded to accommodate.
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