A massive surge in subsidies risks a “fragmentation of the internal market” and “likely harmful subsidy races with third countries and within the EU and possible negative effects on cohesion within the European Union,” Competition Commissioner Margrethe Vestager warns in a letter to EU ministers, dated January 13 and obtained by Playbook and my colleague Samuel Stolton.

Saving the single market: Vestager’s letter comes after Playbook reported last week that Germany and France have effectively blown up the EU’s state aid regime — once known as the world’s strictest and most successful system to prevent governments from pouring taxpayer cash into companies rather than encouraging competition. As Playbook revealed, the two countries accounted for nearly 80 percent of subsidies granted under a “Temporary Crisis Framework” first launched during the COVID pandemic but prolonged so many times, it’s no longer really temporary.

Of the €672 billion in national subsidy plans approved by Brussels under the emergency rules, “53% of state aid approved has been notified by Germany while France represents around 24%,” Vestager tells ministers in the letter.

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