State aid: Commission adopts Temporary Framework to enable Member States to further support the economy in the COVID-19 outbreak

covid19 cans

(Credit: Unsplash)

This article is brought to you in association with the European Commission.


The European Commission has adopted a Temporary Framework to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the COVID-19 outbreak. Together with many other support measures that can be used by Member States under the existing State aid rules, the Temporary Framework enables Member States to ensure that sufficient liquidity remains available to businesses of all types and to preserve the continuity of economic activity during and after the COVID-19 outbreak.

Executive Vice President Margrethe Vestager, in charge of competition policy, said: “The economic impact of the COVID-19 outbreak is severe. We need to act fast to manage the impact as much as we can. And we need to act in a coordinated manner. This new Temporary Framework enables Member States to use the full flexibility foreseen under State aid rules to support the economy at this difficult time.”

The State aid Temporary Framework to support the economy in the context of the COVID-19 outbreak, based on Article 107(3)(b) of the Treaty on the Functioning of the European Union, recognises that the entire EU economy is experiencing a serious disturbance. To remedy that, the Temporary Framework provides for five types of aid:

(i)  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.

(ii)  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.

(iii) 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.

(iv) Safeguards for banks that channel State aid to the real economy: Some Member States plan to build on banks’ existing lending capacities, and use them as a channel for support to businesses – in particular to small and medium-sized companies. The Framework makes clear that such aid is considered as direct aid to the banks’ customers, not to the banks themselves, and gives guidance on how to ensure minimal distortion of competition between banks.

(v) 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.

Given the limited size of the EU budget, the main response will come from Member States’ national budgets. The Temporary Framework will help target support to the economy, while limiting negative consequences to the level playing field in the Single Market.

The Temporary Framework therefore 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. The aid should therefore help businesses to weather the downturn and to prepare a sustainable recovery.

The Temporary Framework complements the many other possibilities already available to Member States to mitigate the socio-economic impact of the COVID-19 outbreak, in line with EU State aid rules. On 13 March 2020, the Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak setting out these possibilities. For example, Member States can make generally applicable changes in favour of businesses (e.g. deferring taxes, or subsidising short-time work across all sectors), which fall outside State Aid rules. They can also grant compensation to companies for damage suffered due to and directly caused by the COVID-19 outbreak. This can be useful to support particularly impacted sectors, such as transport, tourism, hospitality and retail.

The Framework will be in place until the end of December 2020. With a view to ensuring legal certainty, the Commission will assess before that date if it needs to be extended.

Background

State aid rules enable Member States to take swift and effective action to support citizens and companies, in particular SMEs, facing economic difficulties due to the COVID-19 outbreak.

The Temporary Framework adopted today complements the ample possibilities for Member States to design measures in line with existing EU State aid rules, as set out in the Communication on a Coordinated economic response to the COVID-19 outbreak of 13 March 2020. In particular, they can adopt measures that fall outside the scope of State aid control, such as national funds granted to health services or other public services to tackle the Covid-19. Member States can also immediately act through public support measures that are available to all companies such as wage subsidies, suspension of payments of corporate and value added taxes or social contributions. In addition, Member States can grant financial support directly to consumers, for example for cancelled services or tickets that are not reimbursed by the operators concerned.

In addition, EU State aid rules enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid. Article 107(2)(b) of the Treaty on the Functioning of the European Union enables Member States to compensate companies for the damage directly caused by exceptional occurrences, such as those caused by the COVID-19 outbreak, including measures in sectors such as aviation and tourism.

The Commission had adopted a Temporary Framework in 2008, in response to the global financial crisis.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

State aid: Commission invites interested parties to provide comments on proposed draft Climate, Energy and Environmental State aid Guidelines

Parliament gives green light to EU-Singapore trade and investment protection deals

COVID 19 Vaccine: A new terror or a savior for mankind?

Cyprus President urges collective leadership to address ‘root causes’ of world’s crises

EU Budget 2021 approved: supporting the recovery

Obama turns the G20 summit into warmongering platform

This is how many people are forcibly displaced worldwide

EU food watchdog: more transparency, better risk prevention

COVID-19: What you need to know about the coronavirus pandemic on 9 April

Smart toys: Your child’s best friend or a creepy surveillance tool?

Draghi will not hesitate to zero ECB’s basic interest rate

Biggest London City Banks ready to move core European operations to Frankfurt or Dublin?

Ukraine: EU report notes continued implementation of the reform agenda though challenges remain

EU: Turkey to shelter Syrian refugees and turn other immigrants back in return of €3 billion

UN working to prevent attacks on civilians in eastern DR Congo

CLIMATE CHANGE FOCUS: Cows, coffee and sustainable farming

The world invested almost $2 trillion in energy last year. These 3 charts show where it went

Anti-vaccers: does the empty can rattle the most?

EU consumers will soon be able to defend their rights collectively

Could robot leaders do better than our current politicians?

MWC 2016 LIVE: Industry looks to reduce mobile gender gap

Why education and accountability are important for developing countries?

The metamorphosis of the categorical imperative in medical students

How should cities prepare for self-driving cars? Here’s a roadmap

EU fight against tax-evasion and money laundering blocked by Britain

UN chief welcomes Taliban’s temporary truce announcement, encourages all parties to embrace ‘Afghan-owned peace’

Although Greece is struggling to pay salaries and pensions Varoufakis is “optimistic”; the Sting reports live from EBS 2015

Coronavirus Global Response: EIB and Commission pledge additional €4.9 billion

Industry 4.0: Championing Europe’s fourth industrial revolution

A European young student shares his thoughts on Quality Education

France: New labour laws for more competitiveness

EU adopts rebalancing measures in reaction to US steel and aluminium tariffs

Employment and Social Developments in Europe: 2018 review confirms positive trends but highlights challenges, in particular linked to automation and digitalisation

The more we learn about Antarctica, the greater the urgency to act on climate change

Dare to be vulnerable, and three other lessons in leadership

Lorenzo Natali Media Prize 2019: winners of EU’s development journalism award unveiled

A silent killer: the impact of a changing climate on health

Switzerland to introduce strict restrictions on executive pay

Ahead of State of the Union the European Youth Forum highlights lack of action on youth employment

The Challenger Within – Mental Health In Romania During Lockdown

10 ways COVID-19 could reshape offices

Why salaries could finally be on the way up

Problems Faced by Young Doctors and What We Can Do About Them

How big data can help us fight climate change faster

Hydrogen power is here to stay. How do we convince the public that it’s safe?

EU Facility for Refugees in Turkey: €6 billion to support refugees and local communities in need fully mobilised

Promoting Health in the Brazilian Amazon: one nation but many cultures

Here’s what happened when a charity gave $1,000 each to poor households in Kenya

Will Cameron succeed in keeping UK inside the EU and reverse the present economic downturn?

Armenia should take vigorous measures against entrenched corruption

State aid: Commission approves €1.25 billion German measure to recapitalise TUI

How Britain’s backyard bird feeders are shaping evolution

The EU responds to US challenges by fining Apple with €13 billion

Only international actions can settle the world’s ‘enormous and diverse cross-border challenges’, Qatar tells UN Assembly

Questions & Answers on vaccine negotiations

Brain drain 2017: why do medical students need to emigrate to become doctors in 2017?

Investment and Financing under the Belt and Road Initiative (BRI): EU and Chinese stakeholders share their views at European Business Summit 2018

World Malaria Day: 7 things to know about the deadly disease

Systems leadership can change the world – but what exactly is it?

Commission launches open access publishing platform for scientific papers

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s