Thursday

9th Jul 2020

Vestager hits back at Lufthansa bailout criticism

  • Commissioner Margarethe Vestager said she is not putting 'extra hurdles' to Lufthansa's state aid (Photo: Kevin Hackert)

EU Commission vice-president Margrethe Vestager on Friday (29 May) hit back by at criticism she is being too tough on the bailout package for Germany's air carrier Lufthansa.

Lufthansa and the German government this week agreed a more than €9bn rescue package, making the German government take a 20 percent stake in the airline, which now requires a green light from commission competition regulators.

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  • Vestager: 'There is a high risk that if you hold market power, that you are a big, impressive company, and you get a lot of aid, that competition will be disturbed, this is why we ask for a remedy' (Photo: European Parliament)

Vestager said the commission is not "creating extra hurdles" - arguing that companies getting large capital injections from the state have to offset their competitive advantage.

"We are making sure that when any company with market power with a recapitalisation bigger than €250m, that disturbance of competition is being remedied. Because the economy will pick up again, and there will competitors to any company with market power and state recapitalisation, who will compete against this company," Vestager explained to reporters in Brussels.

"It is to be able to balance the situation and make sure that the single market is still working," she said.

"There is a high risk that if you hold market power, that you are a big, impressive company, and you get a lot of aid, that competition will be disturbed, this is why we ask for a remedy," Vestager said.

Lufthansa, meanwhile, has criticised EU regulators for asking the airline to give up some slots at its hubs in Frankfurt and Munich, where it commands a two-thirds market share.

Commission regulators are under pressure to scrutinise huge subsidies governments are now handing out to to help in the coronavirus crisis. Trillions of euros in state aid have already been approved, overall.

German MEP Daniel Caspary, who heads the parliamentary delegation of Germany's ruling Christian Democrats, criticised Vestager for what he sees as the weakening of large European companies.

"It is pathetic that Ms Vestager regularly decides to weaken European companies such as Lufthansa, Alstom, Bombardier in the global market," he tweeted.

The commission last year decided to ban the merger of Germany's Siemens and France's Alstom to create a European railway company, citing concern over rising prices and costs for taxpayers.

Both the French and German governments supported the deal, and some argued that Vestager's interpretation of competition rules hamper European companies' global role.

"Moreover, Vestager has has not been able to tackle the excessive market power of companies like Amazon, Google, Facebook and others on European and international markets. By that, she is harming the #EU's global competitiveness," Caspary argued.

"Commissioner Vestager should immediately approve the Lufthansa rescue package without further requirements," he added.

Low-cost carrier Ryanair, which also received help from the UK government, has challenged the Lufthansa bailout, arguing it would distort competition.

"How can airlines like Ryanair, EasyJet and Laudamotion be expected to compete with Lufthansa in the short-haul market to and from Germany, now that it has €9bn worth of German government subsidies to allow it to engage in below-cost selling or buy up even more competition for the next number of years," Ryanair CEO Michael O'Leary said earlier this week in a statement.

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