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State Aid Policies in Response to the COVID-19 Shock: Observations and Guiding Priciples

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  • Massimo Motta
  • Martin Peitz

Abstract

The drastic economic shock suffered around the world has led many countries to roll out support programmes to its economies. Firms in difficulties may have part of their labour costs covered by the state, may be allowed to postpone due tax payments, and may be beneficiaries of sector-specific or company-specific support programmes. In this article, the authors reflect on the general challenges when designing state aid policies and set out some guiding principles on state aid programmes by EU member states. They address the challenges that arise within the European Single Market when individual EU member states implement their own, non-harmonised programmes. In particular, such programmes run the risk to the distort competition in the Single Market. This risk is particularly pronounced for state support that goes beyond short-run liquidity provision and employment support. Oversight by the European Commission and EU-wide programmes for critical sectors are seen as essential to maintain the Single Market intact.

Suggested Citation

  • Massimo Motta & Martin Peitz, 2020. "State Aid Policies in Response to the COVID-19 Shock: Observations and Guiding Priciples," CRC TR 224 Discussion Paper Series crctr224_2020_179, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2020_179
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp179
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    References listed on IDEAS

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    1. Massimo Motta & Martin Peitz, 2020. "EU state aid policies in the time of COVID-19," Vox eBook Chapters, in: AgneÌ€s BeÌ nassy-QueÌ reÌ & Beatrice Weder di Mauro (ed.), Europe in the Time of Covid-19, edition 1, volume 1, chapter 1, pages 73-77, Centre for Economic Policy Research.
    2. Massimo Motta & Martin Peitz, 2020. "The EU recovery fund: An opportunity for change," Vox eBook Chapters, in: AgneÌ€s BeÌ nassy-QueÌ reÌ & Beatrice Weder di Mauro (ed.), Europe in the Time of Covid-19, edition 1, volume 1, chapter 1, pages 78-82, Centre for Economic Policy Research.
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    Citations

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    Cited by:

    1. Dorothée De Franclieu & Émilie Hermet, 2021. "State aid in the Covid-19 crisis: a European dilemma [Les aides d’État dans la crise Covid 19 : un dilemme européen]," Bulletin de la Banque de France, Banque de France, issue 238.
    2. Julia Anderson & Simone Tagliapietra & Guntram B. Wolff, 2020. "A Framework for a European Economic Recovery After COVID-19," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(4), pages 209-215, July.
    3. Antoine Camous & Grégory Claeys, 2020. "The evolution of European economic institutions during the COVID‐19 crisis," Post-Print hal-03972146, HAL.
    4. Antonia Díaz & Luis A. Puch, 2021. "EU After COVID-19: An Opportunity for Policy Coordination," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 56(4), pages 197-200, July.
    5. Antonia Díaz, 2020. "Common Fiscal Capacity Is Needed to Strengthen Risk Sharing," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(4), pages 215-219, July.

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    More about this item

    Keywords

    state aid; recapitalisation; COVID-19; European Single Market;
    All these keywords.

    JEL classification:

    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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