Taking a closer look: How to improve the design of the Solvency Support Instrument

The Solvency Support Instrument (SSI) is central to the European Commission’s proposal to mitigate economic damage of the pandemic. The new tool would use part of the money raised under the Recovery Instrument to provide equity support to struggling firms. It could become a powerful tool for the recovery. However, Nils Redeker and Theresa Küspert argue in their Policy Paper that the instrument, in its current form, risks providing free lunch bailouts for owners and private investors without ensuring that public support secures jobs, avoids market concentration, and puts firms on a growth path more conducive with the EU’s broader industrial policy goals. To remedy these shortcomings, the instrument needs clear political criteria for equity support; it should be linked to binding social and environmental conditions; public banks should be put in the lead of its rollout and political control of the instruments needs to be improved.  

Image: CC Erich Ferdinand , Source: Flickr