The Economics of State Aid for the Rescue and Restructuring of Firms in Difficulty: Theoretical Considerations, Empirical Analysis and Proposals for Reform

Miguel Angel Bolsa Ferruz and Phedon Nicolaides ()
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Phedon Nicolaides: Director, Department of European Economic Studies, College of Europe (Bruges)

No 27, Bruges European Economic Research Papers from European Economic Studies Department, College of Europe

Abstract: State aid for rescue and restructuring (R&R) of companies in difficulty causes a significant distortion of competition. It prevents the market from eliminating inefficient companies. Because of this, the European Commission has to be specially strict when it assesses rescue or restructuring aid. This paper examines recent cases of corporate restructuring partly funded with public money. It explains the main aspects of the current guidelines which are applicable to R&R State Aid and establishes a theoretical framework for the economic assessment of R&R aid. It then analyses decisions adopted by the European Commission concerning R&R state aid during the period 2000-2013. It finds that there is little economic rationale in the granting of R&R aid. The paper concludes by applying the lessons drawn from the empirical analysis to the anticipated revision of the R&R guidelines in the context of the State Aid Modernisation process.

Keywords: European Union; competition policy; state aid; rescue and restructuring; state aid modernisation; economic assessment (search for similar items in EconPapers)
JEL-codes: F15 O52 (search for similar items in EconPapers)
Pages: pages
Date: 2013-09
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