EU State Aid Policy, Economic Approach, Bailouts, and Merger Policy : Two Comments

The first comment argues that the current economic approach to EU state aid policy tends to become a general control of the effectiveness of all subsidies in the Member States. This goes far beyond the initial intention of the EU competition rules of Art. 87 to 89 EC Treaty. An economic approach that also takes into account the economic theory of federalism would lead to a sophisticated two-level system of state aid control in which (1) the EU state aid control is limited to state aid with spillover effects on other Member States and (2) national agencies for controlling subsidies focus on subsidies with their primary effects within the Member States. The second comment suggests the possibility of using EU merger policy to prevent firms from becoming ‘too big to fail’. This would reduce the danger of bailouts that can lead to significant distortions of competition. The possibility of a bailout test in merger policy is discussed