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European Commission produces temporary State Aid framework

Yesterday (19/3/20), the European Commission adopted a Temporary Framework for state aid measures to support the economy in the current COVID-19 outbreak (C(2020) 1863 final). It is intended to apply until 31 December 2020.

By way of context, existing options available to Member States (“MS) includes

  1. Those measures MS can put in place outside the scope of EU State aid control, recently outlined in the Commission communication of 30 March 2020 (COM (2020) 112 final). These include e.g. wage subsidies.
  2. Designing  support measures in line with the General Block Exemption Regulation (Regulation 651/2014 of 17 June 2014) without the Commission’s involvement.
  3. On the basis of Art 107(3)(c) TFEU and the Rescue and Restructuring State Aid Guidelines, Member States can notify to the Commission aid schemes to meet acute liquidity needs, and/or pursuant to Art 107(2)(b) TFEU compensate undertakings in particularly badly hit sectors (e.g. transport, hospitality, retail) for damages caused by the outbreak. Again these should be notified to the Commission for assessment.

To complement these existing measures, the Commission now sets out temporary state aid measures it considers compatible with Art 107(3)(b) TFEU, which can be “approved very rapidly upon notification”. MS must still show the measures are necessary, appropriate, and proportionate to remedy a serious disturbance in the economy of the MS concerned. In addition, each of these temporary measures comes with several conditions that must be complied with. Newly permissible measures include:

  1. Aid in the form of direct grants, repayable advances or tax advantages, which do not exceed EUR800,000 per undertaking
  2. Aid in the form of guaranteed loans, with limitations on premium, principal and duration.
  3. Aid in the form of subsidised interest rates for loans, with limitations on rates, principal, and duration
  4. Where either guaranteed loans or subsidised interest rates are channelled through financial institutions, those institutions are expected to be able to show they are passing the benefits to the end users, through e.g. higher volumes of financing, riskier portfolios, lower collateral requirements, lower guarantee premiums or lower rates.
  5. Support for short-term export credit insurance as an exception under para. 18(d) Commission Communication on short-term export-credit insurance, where it can be shown that a risk is no longer marketable.

Aid under heading (1) may be combined with either aid under heading (2) or heading (3), and with aid granted under heading (5).

By James Neill and Nicholas Grant.

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