Does the government take grants subsidies donations morally

Has the government done everything right with the corona aid?

Finance Minister Gernot Blümel (ÖVP) never tires of emphasizing how much is being done for domestic companies. When it comes to corona aid, the EU is the front runner, more than 31 billion euros have been promised. The fact that that sum also includes deferrals that companies have to repay later one way or another is often pushed into the background at press conferences.

In any case, the criticism of the Covid aid programs continues. Numerous entrepreneurs fear not only that aid will expire, but also the impending mountain of debt if deferred loans, levies and insurance contributions are due. Many of them will not survive economically in 2021, experts warn.

Not only in view of the impending bankruptcy wave, but also because of the billions of taxes being spent, many are wondering: Was funding received properly? Here the finance minister likes to refer to Brussels. The government wants, is the credo, but the EU is putting a stop to the states. That's not entirely true, says Wifo economist Oliver Fritz. It was not right to blame the EU Commission in the autumn. From the point of view of the economic researcher, Austria could have made better use of the leeway given by the Commission.

No disaster relief

Because in Austria - in contrast to many other EU countries - the so-called disaster aid is not used. This is particularly useful in times of lockdown, explains Fritz. Because unlike the sales replacement, which depending on the industry and month replaces up to 50 or up to 80 percent of the previous year's sales in the respective month, there is no upper limit set by the EU for disaster relief. This can especially help large companies, whose damage is far greater than the maximum of the subsidies.

So far, the cap for the fixed cost subsidy was 800,000 euros and for loss compensation it was three million euros. Only last week this was increased to 1.8 million euros and ten million euros respectively. A further increase is unlikely in the near future, say those familiar with the matter.

No overcompensation

In contrast to loss compensation, disaster relief must not result in overcompensation. "That would have been the better solution," says Fritz. When it comes to replacing sales, companies could also take advantage of other aids at the same time, and restaurateurs were allowed to offer take-away. "It has been grossly over-funded," summarizes the economic researcher.

He believes it is unlikely that the aid without a cover will support ailing companies without end. The funding guidelines would exclude companies that were already in economic difficulties before the pandemic. Disaster relief is also manageable in terms of budget, says the economist. The number of large companies affected in the country is manageable.

Clear the jungle

So what would have made more sense? Fritz would clear the jungle of Covid aid and only offer a few instruments. He advocates a continuous fixed cost subsidy and loss compensation, the latter must be more generous in the lockdown. "We need a flexible system where you flip the switch between lockdown and non-lockdown times." According to the economic researcher, this is possible under state aid law.

Suppliers indirectly affected by the lockdown - such as a hotel laundry - can also be helped more easily in this way. The regulation for suppliers announced for the end of January has not yet been presented. (Nora Laufer, February 2nd, 2021)

Background: The EU framework for corona aid from the member states

Two pieces of legislation, regulated in the Treaty on the Functioning of the EU, have come into focus in the pandemic. On the one hand Article 107 paragraph 2b (so-called "disaster relief"), on the other hand Article 107 paragraph 3b. The former states that "aid to repair damage caused by natural disasters or other extraordinary events" is compatible with the EU internal market. The second concerns "aid to promote important projects of common European interest or to remedy a serious disturbance in the economic life of a member state". These "can" be considered compatible with the internal market. There is therefore a margin of discretion in paragraph 3b, but not in paragraph 2b.

There is a narrow interpretation of paragraph 2b by the Union Courts. There must be specific damage - a loss or decline in sales is not enough - and this must be causally related to a natural disaster or some other extraordinary event. For the EU, pandemic control restrictions such as the closing of inns and hotels are considered an exceptional event. In times when there are restrictive measures, (partial) restrictions on business life or even a lockdown, paragraph 2b is applicable.

In times when no restrictions are in force, for example in the summer of 2020 between the first and second lockdown, when the economy suffered not from the measures but from the general uncertainty and consumer reluctance, paragraph 2b does not apply, but paragraph 3b does . The bank rescue as a result of the financial crisis in 2008 was based on this clause. In the Corona crisis, the EU Commission created a temporary aid framework on the basis of this paragraph.

This temporary aid framework has already been adapted five times since the outbreak of the pandemic in spring 2020. In total there are around 500 aid programs set up by the individual member states in the EU. All together have a budget of three trillion euros. However, the amount paid out is significantly lower. In Austria, the government's corona aid framework amounts to 49.6 billion euros. According to the Ministry of Finance, around 31.2 billion had been approved or paid out by January 15. (APA)

More on the subject:

Corona aid: Blümel continues to confront the EU Commission

The state is liable for loans amounting to billions. What if the companies go bankrupt?


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