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Ahlborn, Christian; Piccinin, Daniel --- "The Great Recession and Other Mishaps: The Commission’s Policy of Restructuring Aid in a Time of Crisis" [2011] ELECD 703; in Szyszczak, Erika (ed), "Research Handbook on European State Aid Law" (Edward Elgar Publishing, 2011)

Book Title: Research Handbook on European State Aid Law

Editor(s): Szyszczak, Erika

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849802741

Section: Chapter 7

Section Title: The Great Recession and Other Mishaps: The Commission’s Policy of Restructuring Aid in a Time of Crisis

Author(s): Ahlborn, Christian; Piccinin, Daniel

Number of pages: 52

Extract:

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 finan-
cial 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 govern-
ments of Belgium, Luxembourg and France and of Fortis by the govern-
ments 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 ...