Chapter 7: The Great Recession and Other Mishaps: The Commission’s Policy of Restructuring Aid in a Time of Crisis
7 The Great Recession and other mishaps: the Commission’s policy of restructuring aid in a time of crisis Christian Ahlborn and Daniel Piccinin1 I. STATE AID AND THE FINANCIAL CRISIS: INTRODUCTION AND OVERVIEW On 15 September 2008 Lehman Brothers files for bankruptcy. The financial markets and the world economy stare into the abyss. The next four weeks witness government intervention in the financial sector at a scale previously neither seen nor imagined: the US Government takes control of AIG after an injection of US $85 billion, the same day as Lehman files for bankruptcy; the following weekend, the US treasury secretary, Henry Paulson, finalises the details of his US $700 billion ‘bad bank’ plan which, after some back and forth, is adopted by Congress on 3 October.2 A similar picture emerges on the other side of the Atlantic (albeit with a short delay): on 28 September 2008, the UK Government nationalises Bradford and Bingley and Germany underwrites a $35 billion bail-out of Hypo Real Estate; two days later sees the rescue of Dexia by the governments of Belgium, Luxembourg and France and of Fortis by the governments of Belgium, Luxembourg and the Netherlands; Ireland extends its bank guarantees the same day.3 On 8 October 2008 the UK unveils a rescue plan for £250 billion for the UK banks.4 The European Commission plays a limited role in these rescue measures. However, Ireland’s extension of its bank guarantees to Irish banks, covering an estimated €400 billion of bank liabilities, raises concerns that...
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