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European Union member states may contract investment banks to help manage a wave of corporate insolvencies in the wake of the Covid-19 pandemic, picking through companies big and small to decide which merit public aid and which should be allowed to go under, EU finance sources told MNI.
With the EU likely to maintain emergency fiscal support measures for firms and employment for some while yet, officials said the bloc must consider a broad package of measures, including how emergency Recovery Funds are deployed, streamlining corporate insolvency processes and treatment of bank bailouts in the face of rising bad loans.
"The public sector doesn't have the tools, the experience or the information to assess the viability of companies," one source said. "The financial sector does. When it comes to equity provision, our administrative capacity is also limited. A government can probably handle equity stakes in a handful of large companies, but it certainly cannot handle equity participation in tens of thousands of SMEs."
SLOW VACCINE PROGRESS
Member states agree fiscal support needs to continue for months and maybe longer, said another source close to talks on the future evolution of fiscal policy, pointing to unexpected economic drags from the stuttering vaccine rollout in some EU states and the emergence of Covid mutations.
"But it's also clear that this blanket support can't continue for ever," the official said. "In order to be credible in providing economic support at the moment we need to spell out what is the medium-term plan."
"Many member states take the view that support should not be withdrawn prematurely, because the risks are too great, " another source said, before noting that more fiscally conservative states argue that delaying the withdrawal of support also brings with it important risks.
"Just as important as getting targeted support right is to have well-functioning, fast insolvency frameworks," the source added.