State aid: Commission approves €10 billion German scheme to compensate companies for damages suffered due to coronavirus outbreak

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

The European Commission has found a €10 billion German scheme to compensate companies for damages related to the coronavirus outbreak to be in line with EU State aid rules.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This €10 billion scheme enables Germany to compensate, at least in part, businesses of all sectors for the damages suffered and emergency measures taken to limit the spread of the coronavirus. We continue working closely with Member States to find workable solutions to support companies in these difficult times, in line with EU rules.”

Under the scheme, companies from all sectors will be entitled to compensation for certain damages suffered due to the full closure of their activities as a result of the coronavirus outbreak and the restrictive measures that the German government had to introduce to contain the spread of the virus. The compensation period will depend on whether restrictions are in place in the period between 16 March 2020 and 31 December 2021.  The compensation, in the form of direct grants, can cover up to 100% of the actual damage incurred by the beneficiaries during the eligible period, and can only be granted after damage is incurred.

The Commission assessed the measure under Article 107(2)(b) of the Treaty on the Functioning of the European Union (TFEU), which enables the Commission to approve State aid measures granted by Member States to compensate specific companies or sectors for damage directly caused by exceptional occurrences.

The Commission considers that the coronavirus outbreak qualifies as such an exceptional occurrence, as it is an extraordinary, unforeseeable event having a significant economic impact. As a result, exceptional interventions by the Member States to compensate for the damages directly linked to the outbreak are justified.

The Commission found that the German aid scheme will compensate damages that are directly linked to the coronavirus outbreak. The Commission also found that the measure is proportionate, as the envisaged compensation does not exceed what is necessary to make good the damage.

The Commission therefore concluded that the scheme is in line with EU State aid rules.

Background

Aid granted under the measure approved today may be combined with other aid for the compensation of eligible damage in the eligible period between 16 March 2020 and 31 December 2021, and with aid under the State aid Temporary Framework, up to a maximum amount of aid equal to 100% of the eligible damage. The other aid with which this measure can be combined includes aid already approved by the Commission on the basis of the Temporary Framework under the “Third Amended Federal Scheme on Small Grants 2020” (SA.56790, last amended by SA.61744), the “Federal Scheme on subsidised Loans 2020” (SA.56863, last amended by SA.61744), the “Federal Scheme on Guarantees 2020” (SA.56787, last amended by SA.61744), the “Federal Scheme on Uncovered Fixed Costs 2020” (SA.59289, last amended by SA.61744), the “Federal Scheme on recapitalisation measures and subordinated loans 2020” (SA.58504, last amended by SA.61744), as well as aid approved on the basis of Article 107(2)(b) TFEU under the “Federal scheme for damage compensation for the November and December 2020 lockdown” (SA.60045).

Financial support from EU or national funds granted to health services or other public services to tackle the coronavirus situation falls outside the scope of State aid control. The same applies to any public financial support given directly to citizens. Similarly, public support measures that are available to all companies such as for example wage subsidies and suspension of payments of corporate and value added taxes or social contributions do not fall under State aid control and do not require the Commission’s approval under EU State aid rules. In all these cases, Member States can act immediately.

When State aid rules are applicable, Member States can design ample aid measures to support specific companies or sectors suffering from the consequences of the coronavirus outbreak in line with the existing EU State aid framework. On 13 March 2020, the Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak setting out these possibilities.

In this respect, for example:

• Member States can compensate specific companies or specific sectors (in the form of schemes) for the damage suffered due and directly caused by exceptional occurrences, such as those caused by the coronavirus outbreak. This is foreseen by Article 107(2)(b)TFEU.
• State aid rules based on Article 107(3)(c) TFEU enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid.
• This can be complemented by a variety of additional measures, such as under the de minimis Regulation and the General Block Exemption Regulation, which can also be put in place by Member States immediately, without involvement of the Commission.

In case of particularly severe economic situations, such as the one currently faced by all Member States due the coronavirus outbreak, EU State aid rules allow Member States to grant support to remedy a serious disturbance to their economy. This is foreseen by Article 107(3)(b) TFEU of the Treaty on the Functioning of the European Union.

On 19 March 2020, the Commission adopted a State aid Temporary Framework based on Article 107(3)(b) TFEU to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework, as amended on 3 April, 8 May, 29 June, 13 October 2020 and 28 January 2021, provides for the following types of aid, which can be granted by Member States: (i) Direct grants, equity injections, selective tax advantages and advance payments; (ii) State guarantees for loans taken by companies; (iii) Subsidised public loans to companies, including subordinated loans; (iv) Safeguards for banks that channel State aid to the real economy; (v) Public short-term export credit insurance;(vi) Support for coronavirus related research and development (R&D); (vii) Support for the construction and upscaling of testing facilities; (viii) Support for the production of products relevant to tackle the coronavirus outbreak; (ix) Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions; (x) Targeted support in the form of wage subsidies for employees; (xi) Targeted support in the form of equity and/or hybrid capital instruments; (xii) Support for uncovered fixed costs for companies facing a decline in turnover in the context of the coronavirus outbreak.

The Temporary Framework will be in place until the end of December 2021. With a view to ensuring legal certainty, the Commission will assess before this date if it needs to be extended.

The non-confidential version of the decision will be made available under the case number SA.62784 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.

More information on the Temporary Framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.

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