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Special> Global Financial Crisis> Latest
UPDATED: November 19, 2008
EU Nations Pile up State Aid to Tide Over Financial Crisis
In view of the ongoing financial crisis, the share of rescue and restructuring aid is likely to increase significantly for some countries in 2008

European Union (EU) member states are increasingly using the possibilities offered by the recently revised EU state aid rules to better tackle the financial crisis, a report said Tuesday.

In view of the ongoing financial crisis, the share of rescue and restructuring aid is likely to increase significantly for some countries in 2008, the European Commission said in its latest State Aid Scoreboard.

EU governments had rushed to spend billions of euros in emergency aid to save their troubled banks in recent months. In the face of a sluggish economy, they were prepared to spend more on stimulus packages.

Over the last 25 years, the overall level of EU state aid has fallen from more than 2 percent of gross domestic product (GDP) in the 1980s to around 0.5 percent in 2007. But the financial crisis may reverse the trend.

EU officials meanwhile stressed fair competition when some companies and sectors are expected to receive the aid.

"You should not have a situation where a subsidy received by one company puts another company in another member state or even in the same member state out of business purely because the company getting the subsidy has an unfair competitive advantage," said European Commission spokesman Jonathan Todd.

The EU state aid rules are intended to ensure fair competition throughout the 27-nation bloc if one company or sector receives support from the government budget.

Besides, the commission report showed EU nations on average awarded 80 percent of their aid to horizontal objectives in 2007, compared with around 50 percent in the mid-1990s, with increased spending on R&D and environmental aid.

"I very much welcome member states' efforts to better target their aid. Compared with 50 percent of aid going to horizontal objectives in the 1990s, today's figure of 80 percent looks very healthy," EU Competition Commissioner Neelie Kroes said. "In the face of an economic downturn, targeted aid is even more important."

(Xinhua News Agency November 19, 2008)

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