Europe risks 'uneven competition' as Germany dominates state aid interventions, Cyprus warns


The European Union faces “uneven” competition in the market as countries such as Germany and Italy make significant state aid interventions in the age of Covid-19 in comparison with other nations, the Cypriot finance minister told CNBC Wednesday.

The EU, a political conglomerate of 27 nations, has relaxed its strict state aid regulations three times since March as many businesses across the region face severe difficulties due to the health crisis. However, certain European countries have more fiscal leeway to support companies compared to other highly-indebted nations.

“The possibility is that there will be an uneven competition that will harm the single market and the single market is the biggest achievement at the European Union right now,” Constantinos Petrides, the finance minister of Cyprus, told CNBC’s “Squawk Box Europe” Wednesday.

The EU’s single market is a common area without borders where goods and services move freely from one EU country to the next.

According to the European Commission, the executive arm of the EU, there have been 2.19 trillion euros ($2.46 trillion) in state aid schemes approved since the pandemic began.

Germany has made the most interventions, totaling 46% of the total state aid approved so far.

Italy and France follow suit representing 18% and 17% of the total state aid so far, respectively.

In comparison, Spain, Belgium and Poland accounted for 4.2%; 2.5% and 2.3% of the state aid. Financial help from the remainder of the EU nations is estimated to be between 0.1% and 1.5%.

“This is why we need a recovery plan that will face these challenges, because yes we have relaxed the state aid rules, nevertheless the possibility a country has to finance, support companies through state aid is unevenly spread between the countries,” Petrides said.

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The European Commission said last week it planned to borrow 750 billion euros from capital markets starting in 2021 to mitigate some of the economic costs of the pandemic. The proposal is yet to be approved by the 27 member states.

In the meantime, there are 540 billion euros available in unemployment schemes, business investments and loans to governments. The European Central Bank (ECB) is also buying government bonds as part of its 750 billion euro emergency program and some analysts expect an increase in duration and purchases to be announced Thursday.



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