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EU to reimpose state aid limits as pandemic shock eases

The EU said Thursday it will begin to reimpose the bloc’s suspended state aid rules next year, arguing that the European economy is healing after the shock of the Covid-19 pandemic.

Margrethe Vestager, the European Union’s competition supremo, said the rules limiting public cash injections to struggling companies would return to normal by June 30 next year, six months later than previously planned.

In March 2020, the European Commission largely waived the rules, allowing national governments to urgently pump cash into economies that were felled by drastic anti-coronavirus lockdowns.

Vestager said three trillion euros ($3.4 trillion) in state aid had been approved, in 670 decisions.

“Without extraordinary public support, otherwise viable companies would not have survived,” she told reporters.

Vestager also confirmed plans to modify EU competition rules so that investments can flow more freely to fight climate change and boost Europe’s tech sector.

The Danish commissioner put a special focus on semiconductors, with European companies highly dependent on imports from China, Taiwan and South Korea for their supply.

The supply of semiconductor microchips has been severely constrained in recent months, wreaking havoc on European industry, most notably electric cars and other high tech products.

Vestager warned that Europe needed its own “secure supply” and that the EU “may consider approving public support to fill possible funding gaps”.

A supply of EU-made chips could take years, and will most likely need hefty state backing in order for private companies to take on the challenge.

Vestager said public money could go to help build “first of its kinds of facilities” in Europe, though she added that there would be “safeguards” to help preserve fair competition.

France especially has called for Europe to develop its own microchips and has heaped pressure on the commission to loosen its rules on public investment in order to do so.

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