By Matt Thompson

Law360 (April 20, 2020, 3:44 PM EDT ) The European Union should temporarily scrap its regime limiting state aid to companies if it expects all EU countries to share the burden of the economic fallout from the COVID-19 pandemic, the Austrian finance minister said Monday.

Gernot Blümel, the finance minister, told journalists at a daily news conference that in exchange for his country's support for other members of the bloc, the European Union should suspend rules on competition that restrict when governments can give businesses financial help. The finance minister said he failed to see the logic of rules that allow Austrian taxpayers to bail out other EU countries but not to support companies in Austria.

EU state aid rules prohibit governments from giving direct grants or tax breaks that distort competition among companies operating in the European single market. The European Commission temporarily relaxed the rules in March, allowing countries to offer grants and tax breaks to companies in distress from the global spread of COVID-19, the respiratory disease caused by the novel coronavirus.

Blümel said the rules should be done away with altogether during the crisis so that countries can offer help more quickly.

"We observe EU law and need to notify the commission about every single [proposed measure], talk about it, answer questions — and that of course delays the process," he said.

Austria, which agreed earlier in April to a €500 billion ($543 billion) fund to be drawn on by all EU member countries to help combat the economic shock from the pandemic, wants to be able to show solidarity with its own companies, Blümel said. 

"This solidarity cannot be a one-way street," he said. "We therefore demand that … we suspend the EU state aid regime for the duration of the crisis." 

A spokesperson for the European Commission told Law360 that state aid controls are necessary to preserve a level playing field and avoid the risk that aid granted in one country undermines measures taken in others.

The commission has already approved 77 programs worth several hundred billions of euros to support EU economies facing the impact of the coronavirus outbreak, and those include measures to support Austria, said the spokesperson, who requested anonymity.

For example, the commission approved a €15 billion Austrian liquidity program to support the economy in the coronavirus outbreak as well as Austrian guarantee programs to support small and medium-size entities affected by the outbreak, "providing guarantees for underlying loans up to an amount of €500,000," the spokesperson said.

The Austrian minister's comments followed earlier calls from countries in Southern Europe to countries in Northern Europe to show solidarity by issuing common debt to help respond to the impending recession. Austria, part of the historically frugal north, was reluctant to support so-called Eurobonds.

The meeting that produced an agreement on the half-trillion bailout fund failed to achieve an accord on common debt issuance.

As part of the €500 billion aid package, member countries will be eligible for credit lines from the bloc's permanent bailout fund — the European Stability Mechanism, or ESM — equal to at least 2% of a country's gross domestic product, up to €240 billion.

Finance ministers at the time said they would try to arrange access to the ESM within two weeks to help all EU countries, including those outside the euro currency area, cover public health costs tied to the pandemic.

Countries remain divided on the issue of common debt issuance. Leaders in Belgium, France, Italy, Luxembourg, Spain, Portugal, Greece, Slovenia and Ireland signed a letter in March calling for the use of mutualized debt to share the burden among the subset of the bloc that uses the euro currency.  

--Additional reporting by Todd Buell and Joseph Boris. Editing by Robert Rudinger.

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