CCP Visiting Scholar: Professor Nikolaos Zahariadis

What role do macroeconomic conditions (low real economic growth, high inflation, and high unemployment) play in triggering demands for state aid? The project investigates the effects of the global economic crisis on the state aid responses in two different settings: the United States and the European Union. Because state aid control in Europe is shaped by the European Commission in cooperation with national governments, the European context is further subdivided into a detailed analysis of state aid allocations in the United Kingdom, France, and Germany. To validate the findings derived from the analysis at the national and state levels, the project will also carry out a detailed case study of the banking sector. The time frame is 1992-2009. The paucity of data precludes extending the analysis before 1992 and beyond 2009. The main objective is to show that even though similar macroeconomic conditions prevail across countries, different institutional arrangements provide incentives for diverging state aid responses. In the U.S. responsibility for bailing out ailing industries has shifted to the federal government, leading to greater polarization and political conflict at the state and federal levels. In the European context, the presence and authority of the European Commission has curtailed some of the state aid efforts, allowing national governments to coordinate aid policies while still pursuing nationally-tailored rescue plans. The end result is less political conflict due to a partial shifting of the blame to the Commission.