Similarly, many countries cannot afford to lose their national automobile industry, and are seeing the bailouts as an opportunity to drive progress toward the sector’s decarbonization. As French President Emmanuel Macron recently argued, “We need not only to save the industry but to transform it.” While extending €8 billion in loans to the sector, his government is requiring that it turn out more than one million clean-energy cars by 2025. Moreover, having received €5 billion, Renault must keep open two key French plants and contribute to a Franco-German project to produce electric batteries. As Renault’s major shareholder, the French government will be able to enforce these conditions from both outside and inside the company.

In some cases, governments have gone beyond conditionality to alter ownership models. Germany and France are acquiring or increasing (respectively) the state’s equity stake in airline companies, citing the need to safeguard national strategic infrastructure.

But there are also negative examples. The auto-industry bailout has played out very differently in Italy than it has in France. The FCA Group has convinced the Italian government—which has historically provided large subsidies to Fiat—to grant its subsidiary FCA Italy a €6.3 billion guaranteed loan with basically no enforceable conditions. FCA Italy is expected to merge with the French PSA Group by the end of this year, and the FCA Group itself is no longer even an Italian company. Born in 2014 from the merger of Fiat and Chrysler, it is domiciled in the Netherlands, and its financial headquarters are in London. Worse yet, the company has a poor track record of keeping its investment commitments in Italy, which has fallen off the global map as an auto producer, both in terms of volume and electric vehicles.

In other negative cases, major companies and sectors have leveraged their monopoly or market-dominant bargaining power to lobby against conditionality, or have exploited central banks’ support, which tends to come with fewer or no conditions. For example, in the UK, EasyJet was able to access £600 million ($746 million) in liquidity from the BOE, despite having paid £174 million in dividends a month earlier. And in the US, the Federal Reserve’s decision to start purchasing riskier high-yield bonds has fueled moral-hazard fears. Among those standing to gain are U.S. shale-oil producers, which were already highly leveraged and mostly unprofitable before the pandemic arrived.

Far from a step toward state control of the economy, conditional bailouts have proven to be an effective tool for steering productive forces in the interest of strategic, broadly shared goals. When designed or implemented incorrectly, or avoided altogether, they can limit productive capacity and allow speculators and insiders to extract wealth for themselves. But when done right, they can align corporate behavior with the needs of society, ensuring sustainable growth and a better relationship between workers and firms. If the crisis is not to go to waste, this must be part of the post-COVID-19 legacy.


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