March 6, 2020 / 3:23 PM / a month ago

UPDATE 1-EU may waive state-subsidy rules to bolster virus-hit economy

(Adds quotes, details, background)

BRUSSELS, March 6 (Reuters) - European Union officials are considering temporarily suspending its rules on state subsidies and financial support to economic segments hit hardest by the coronavirus outbreak, an official said on Friday.

Euro zone growth is likely to be slower this year than the 1.2% forecast just last month because of the effects of the virus epidemic, the European Commission said in an internal preliminary assessment.

In addition to measures adopted by EU states to safeguard growth, the EU is considering targeted measures for sectors most in need, which include tourism, transport and carmakers.

“It could be that in some areas there is need for specific support that may require considerations on state aid rules,” the EU official said, adding that the discussions were at a preliminary stage.

“The Commission should establish a temporary state aid framework that allows member states to support an economy in the downward spiral,” EU centre-right lawmaker Markus Ferber said. It should use as blueprint its response to the 2008-09 global financial crisis, he said.

The EU suspended parts of its state aid framework during the crisis to allow governments to bail out banks.

The EU official also said the European Investment Bank could offer further funding to sectors in need of immediate help, for instance through guarantees for liquidity financing to smaller firms.

The EU is also considering granting full flexibility from EU fiscal rules for states that need to spend more to combat the crisis. (Reporting by Francesco Guarascio @fraguarascio; editing by Larry King)

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