The European Commission appears to have rejected the possibility of state aid to airlines experiencing financial difficulties since the September 11 attacks on the World Trade Centre.
In a memo which was publicly circulated this afternoon on the European Commission website, the Commission said it would be irresponsible to "bail out" airlines using public money.
While airlines have been hard hit by the attacks, the memo reads, and while the Commission has put forward proposals designed to ensure that they do not have to bear any extra costs state aid would distort competition and unleash a costly subsidy war.
The Commission, which already introduced measures to aid airlines including possible compensation for losses incurred and government support to cover the cost of security measures, stopped short of sanctioning state aid to airlines which were already in difficulty before the attacks.
The memo reads:" . . The Commission intends to see that European state aid rules are strictly enforced."
"But it is important in this connection to make a clear distinction between the actual cost of the 11 September attacks, for which the Commission is proposing remedies, and the structural problems of the air transport industry, which were apparent before the attacks and will have to be tackled by a restructuring of the sector."
However, the Commission is also to draw up a co-ordinated response to the dramatic increase in airline insurance since the attacks.
"In the wake of moves by insurance companies drastically increasing the cost of cover for acts of war or terrorism, the Commission asked the Ecofin Council to come up with a coordinated response," the memo continues
"The Council agreed that Member States should exceptionally, and as a short-term measure, be allowed to provide cover or pay the higher premiums for a month pending a more lasting solution. The Commission has left open the possibility of extending these measures until the end of the year."
Finally, the Commission concluded that the attacks have resulted in a slowdown of the EU economy more pronounced than had been foreseen.
Nevertheless, it says, the economy is on a sound footing, with inflation under control and fiscal consolidation progressing satisfactorily.
"It should be well able to weather cyclical shocks," it added.
"Tax cuts, favourable interest rates and OPEC's commitment to ensure stable oil prices should also help cushion the impact of the current situation."