The Current Financial Crisis and State Aid in the European Union: Has It Been Timely and Appropriate?

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Abel Mateus, Dec 15, 2008

We are in the middle of the worst financial and economic crisis since the Great Depression. In this paper, I argue that aggressive and timely state aid and intervention are required. The Commission has acted on the measures notified by the Member States in a fast and adequate manner, and has issued generally appropriate guidance, according to a benefit-cost analysis. But this was the response to the first wave of the crisis. I argue that bank guarantees and recapitalization may not be enough to re-launch economic activity and some economies may require the “cleaning-up” of bad debts, which would require a revision of the guidelines.

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