The European Commission adopted on 19 March 2020 a temporary state aid framework enabling EU member states to support their economies affected by the coronavirus epidemic. The temporary framework, which supplements the measures already available to member states under the existing state aid rules, enables governments to ensure sufficient liquidity for businesses and to preserve the continuity of economic activity. The temporary framework will initially be in place until the end of December 2020.
The temporary framework provides for five types of aid:
1. Direct grants, selective tax advantages and advance payments: Member states will be able to set up schemes to grant up to €800,000 to a company to address its urgent liquidity needs.
2. State guarantees for loans taken by companies from banks: Member states will be able to provide state guarantees to ensure banks keep providing loans to the customers who need them.
3. Subsidised public loans to companies: Member states will be able to grant loans with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.
4. Safeguards for banks that channel state aid to the real economy: The temporary framework clarifies that aid channeled to businesses through intermediary banks is considered as direct aid to the banks’ customers, not to the banks themselves. The framework also gives guidance on how to ensure minimal distortion of competition between banks.
5. Short-term export credit insurance: The framework introduces additional flexibility on how to demonstrate that certain countries are not-marketable risks, thereby enabling short-term export credit insurance to be provided by the state where needed.
In order to limit any negative impacts on the level playing field in the single market, the temporary framework includes a number of safeguards. For example, it links the subsidised loans or guarantees to businesses to the scale of their economic activity, by reference to their wage bill, turnover, or liquidity needs, and to the use of the public support for working or investment capital. Accordingly, any aid granted under the temporary framework should enable businesses to weather the current downturn and to prepare a sustainable recovery.
For more information on the European Commission’s response to the coronavirus epidemic, please visit the Commission’s website at https://ec.europa.eu/competition/state_aid/what_is_new/covid_19.html.