Competition Policy and the Crisis—The Commission's Approach to Banking and beyond

• Published date: 01 December 2010
• DOI: 10.1177/0003603X1005500402
• Date: 01 December 2010
• Author: Neelie Kroes
• Subject Matter: Article

THE ANTITRUST BULLETIN: Vol. 55, No. 4/Winter 2010 : 715
Competition policy and
the crisis—the Commission’s
approach to banking and beyond
BY NEELIE KROES*
I.
INTRODUCTION
The last one and a half years of my term in office as EU Competition
Commissioner has been extremely challenging due to the unprece-
dented financial crisis which exploded after the collapse of Lehman
Brothers in September 2008.
While the crisis has been an extended one and recovery from it
uneven, one of the few positive things we can take away from the
experience is the general maintenance of competitive markets.
Unlike during the Great Depression, and in defiance of many
vocal opponents, levels of competition in Europe remain largely unal-
tered by what are, by comparison, massive crisis policy measures.
This is not to say that there are not threats to competition, nor is it to
pretend that financial sector aid especially has had no impact on the
affected markets. However, there is strong support for the view that
the competition policy architecture needs to be maintained. Support-
ers of the view that competition breeds competitiveness, and that
* Vice President, European Commission and European Commissioner
for Digital Agenda; European Commissioner for Competition, 2005–2010.
This article was finalized at the beginning of February 2010, when Ms. Kroes
was still Commissioner for Competition.
© 2010 by Federal Legal Publications, Inc.

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716 : T H E A N T I T R U S T B U L L E T I N : Vol. 55, No. 4/Winter 2010
European consumers and businesses benefit from a level playing
field, have effectively won the argument.
Competition policy may not be loved by all governments and
competitors, but the need for it to act as the backbone of the EU Sin-
gle Market remains substantially unchallenged. And so, while we can
never drop our defenses against protectionism, we can declare that
competition policy and competition enforcers played an important
role in avoiding far worse outcomes from this crisis.
Indeed, the case for a continuing level playing field in Europe is
stronger than ever. In this article I hope to outline my perspective on
why this outcome has been achieved and discuss in some detail the
mechanisms and politics that have been called upon to get us there.
Dealing with the crisis, it must also be noted, has been about more than
the element of banking State aid and instead touches upon all aspects of
European competition policy enforcement, from the idea of crisis car-
tels, to failing firms merger applications, to tendencies of many parties
to demand that financial-sector aid possibilities be extended to them.
European policymakers therefore have had to take bold action to
face such challenges. We have had to increase our work, learn many
new skills on the job, and quickly develop relationships (for example,
between competition authorities and central banks) that have not pre-
viously existed, and which it is now clear should have existed. These
changes have been made in a highly politically pressured environ-
ment, the sort that is not normally conducive to lasting and effective
policy making.
Together the various European Institutions have done much to
increase confidence, deliver stability, and generate more economic
activity—whether via the direct stimulus of the European Economic
Recovery Plan or via new state aid possibilities under the Temporary
Framework for State Aid.1 Specifically, I am pleased to conclude that
the Directorate-General for Competition stepped up to the mark as
1
Communication from the European Commission, Temporary Com-
munity Framework for State Aid Measures to Support Access to Finance in
the Current Financial and Economic Crisis, 2009 O.J. (C16/1),
http://ec.europa.eu/competition/state_aid/legislation/temp_framework_e
n.pdf [hereinafter Temporary Framework].

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T H E E C ’ S A P P R O A C H : 717
part of wider Commission efforts to minimize the impact of the crisis,
even if that meant working around the clock and in temporary offices
in shipping containers for large parts of 2008–09.
II.
EARLY STAGES OF THE CRISIS
My services and I were fortunate—if that is the word—to have
been involved from a very early stage in dealing with the crisis.
Our first awareness of the problems to come came with the diffi-
culties of Northern Rock and several of the German Landesbanken
in 2007. This entrée into the risky behaviors and stubborn defiance
of the sector helped to ready us for the massive influx of aid
demands that flooded in after the collapse of Lehman Brothers in
September 2008.
Knowing that banks in other Member States were likely to face
problems at some point, and knowing also that the situation would be
quite different from Member State to Member State, we were left with
the clear impression that there would need to be common rules and a
liberal use of common sense if and when the credit crisis spread.
In September 2008, the crisis not only spread, it rapidly invaded
many of the key financial markets, bringing them to a standstill and the
financial system to the brink of collapse. Throughout those first weeks
after the collapse of Lehman Brothers, the Commission faced great
pressure to set aside the competition rules on State aid, in order to
allow EU Member States freedom to implement financial sector rescue
measures as...