Blog: Dave LeggettRescue packages

Dave Leggett | 15 December 2008

Tata-owned Jaguar Land Rover is said to be seeking a big loan from the British government to get it through next year and the squawking everywhere for government loans to aid liquidity for embattled auto firms is an interesting one isn't it?

Governments may feel obliged to offer 'rescue packages' for local auto firms and auto firms will feel that they shouldn't waste any time in lobbying/applying for available credit that is likely to be on much better terms than anything they can get privately.

And national governments will feel that they need to act to ensure that it's not their country that loses out in the industrial restructuring that the recession will inevitably cause. Why should, for example, the jobs disappear in Britain rather than in Germany or France? And the local units of auto firms will play on that fear of the recession and its long-term impact being disproportionately felt without the cheap credit and support that 'everyone else is getting'.

What about the danger that the taxpayer ends up subsidising firms that are relatively undeserving in the general clamour for cheap cash? It is something that governments need to consider and if the EU is worth anything, now's the time for it to show that it has a point as a body that can help to avoid beggar-thy-neighbour rescue packages by individual governments. There should be some sort of credible EU-wide response to the recession and its uneven impact on the European economy and its industries. But national governments appear to be stepping in in Europe, wherever you look.   

Back to the UK. Did you see that the Royal Bank of Scotland effectively pulled the plug on parts maker Wagon when the refinancing it needed to avoid administration was refused by the bank? So much for the UK government's attempts to get the banks - some of whom we as taxpayers now partly own following their emergency recapitalisations - lending as part of industrial policy...

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