“An equity fund for a zombie-free and EU-wide recovery”
Julia Anderson, Simone Tagliapietra and Guntram B. Wolff

Public equity stakes in companies impacted by the crisis

Some companies and sectors will need more than just the initial liquidity measures taken by governments. Direct ownership by the states is contemplated in several countries as part of the exceptional measures taken during the pandemic. This article released at Bruegel provides four guiding principles to ensure a good design of a hypothetical EU equity fund of companies affected by the covid-19 crisis.

The main idea behind these principles is to avoid a post-crisis world where "inefficient zombie firms feed on besieged taxpayers," and where the "single market" is seriously threatened. To that end the authors provide four principles to consider how and under what conditions support should be given: 

  1. The support should be provided “only to financially viable firms with viability assessed considering both the past and the future. Rescue plans shouldn’t preserve pre-crisis industrial structures and governments shouldn´t be the main decider.”
  2. “State support should not undermine competition between firms in the EU’s single market.” Viability shouldn´t depend on how much support companies receive from their states.
  3. “State interventions should support broader societal goals, from climate neutrality to social cohesion”
  4. “Taxpayers should receive their share in the rewards of the recovery. It would be unacceptable if massive amounts of public money did nothing more than protect existing shareholders”

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