State aid: Commission approves €500 million Croatian scheme to support companies in context of Russia’s invasion of Ukraine

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The European Commission has approved an up to €500 million Croatian scheme to support companies across sectors in the context of Russia’s invasion of Ukraine. The scheme was approved under the State aid Temporary Crisis Framework, adopted by the Commission on 23 March 2022, based on Article 107(3)(b) of the Treaty on the Functioning of the European Union (‘TFEU’), recognising that the EU economy is experiencing a serious disturbance.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “In a period during which the functioning of the market is severely disturbed, this up to €500 million Croatian scheme will ensure that sufficient liquidity remains available to those companies affected by the current geopolitical crisis by incentivizing lending by private banks. We continue to stand with Ukraine and its people. At the same time, we continue working closely with Member States to ensure that national support measures can be put in place in a timely, coordinated and effective way, while protecting the level playing field in the Single Market.”

The Croatian measure

Croatia notified to the Commission under the Temporary Crisis Framework an up to €500 million scheme to support companies across sectors active in Croatia in the context of Russia’s invasion of Ukraine.

The measure will be open to companies active in all sectors affected by the current crisis, except credit and financial institutions.

Under this measure, which will be administered by the Croatian Bank for Reconstruction and Development (HBOR), the aid will consist in limited amounts of aid or liquidity support in any of the following forms: (i) direct loans;(ii) subsidised loans; or (iii) interest rate subsidies.

This scheme is one of a series of measures conceived by the Croatian authorities to remedy a serious disturbance in their economy. In particular, this measure is aimed at incentivising lending by private banks to companies severely affected by the current geopolitical situation in a period during which the normal functioning of the market is significantly disturbed.

The Commission found that the Croatian scheme is in line with the conditions set out in the Temporary Crisis Framework. In particular, when it comes to limited amounts of aid, (i) the support will not exceed €35,000 per company active in the agriculture, fisheries and aquaculture sectors and €400,000 per company active in all other sectors; and (ii) the aid will be granted by 31 December 2022 at the latest.

When it comes to liquidity support in the form of subsidised loans, the maximum amount per beneficiary will be equal to (i) 15% of its average total annual turnover over the last three closed accounting periods; or (ii) 50% of the energy costs incurred over a 12-month period preceding the application for aid.

Furthermore, (i) the maturity of the loans is limited to six years; (ii) the annual interest rates on the loans respect the minimum levels set out in the Temporary Crisis Framework; (iii) the loans relate to investment or working capital needs; and (iv) the loans contracts will be signed by 31 December 2022 at the latest.

Exceptionally, when the companies are active in sectors that are particularly affected by direct or indirect effects of the current geopolitical crisis and the related sanctions, the amount of the loan may be increased to cover their liquidity needs (i) for a 12-month period for SMEs; and (ii) for a 6 month-period for large enterprises.

In addition, the public support will come subject to conditions to limit undue distortions of competition. For the loans granted through financial intermediaries, this includes safeguards aimed at ensuring that the advantages of the measure are passed on to the largest extent possible to the final beneficiaries via the financial intermediaries.

The Commission concluded that the Croatian scheme is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Crisis Framework.

On this basis, the Commission approved the aid measure under EU State aid rules.

Background

On 23 March 2022, the Commission adopted the State aid Temporary Crisis Framework to enable Member States to use the flexibility foreseen under State aid rules to support the economy in the context of Russia’s invasion of Ukraine.

The Temporary Crisis Framework provides for the following types of aid, which can be granted by Member States:

• Limited amounts of aid, in any form, of up to €35,000 for companies affected by the crisis active in the agriculture, fisheries and aquaculture sectors and of up to €400,000 per company affected by the crisis active in all other sectors;
• Liquidity support in form of State guarantees and subsidised loans; and
• Aid to compensate for high energy prices. The aid, which can be granted in any form, will partially compensate companies, in particular intensive energy users, for additional costs due to exceptionalgas and electricityprice increases. The overall aid per beneficiary cannot exceed 30% of the eligible costs, up to a maximum of €2 million at any given point in time. When the company incurs operating losses, further aid may be necessary to ensure the continuation of an economic activity.  Therefore, for energy-intensive users, the aid intensities are higherandMember States may grant aid exceeding these ceilings, up to €25 million, and for companies active in particularly affectedsectors and sub-sectors up to €50 million.

Sanctioned Russian-controlled entities will be excluded from the scope of these measures.

The Temporary Crisis Framework includes a number of safeguards:

• Proportional methodology, requiring a link between the amount of aid that can be granted to businesses and the scale of their economic activity and exposure to the economic effects of the crisis;
• Eligibility conditions, for example definingenergy intensive users as businesses for which the purchase of energy products amount to at least 3% of their production value; and

The Temporary Crisis Framework will be in place until 31 December 2022. With a view to ensuring legal certainty, the Commission will assess before that date if it needs to be extended. Moreover, during its period of application, the Commission will keep the content and scope of the Framework under review in the light of developments regarding the energy markets, other input markets and the general economic situation.

The Temporary Crisis Framework complements the ample possibilities for Member States to design measures in line with existing EU State aid rules.  For example, EU State aid rules enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid. Furthermore, 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 an exceptional occurrence, such as those caused by the current crisis.

Furthermore, on 19 March 2020, the Commission adopted a Temporary Framework in the context of the coronavirus outbreak. The COVID Temporary Framework was amended on 3 April, 8 May, 29 June, 13 October 2020, 28 January and 18 November 2021. As announced in May 2022, the COVID Temporary Framework has not been extended beyond the set expiry date of 30 June 2022, with some exceptions. In particular, investment and solvency support measures may still be put in place until 31 December 2022 and 31 December 2023 respectively, as already provided for under the existing rules. In addition, the COVID Temporary Framework already provides for a flexible transition, under clear safeguards, in particular for the conversion and restructuring options of debt instruments, such as loans and guarantees, into other forms of aid, such as direct grants, until 30 June 2023.

The non-confidential version of the decision will be made available under the case number SA.103003 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 Crisis Framework and other actions taken by the Commission to address the economic impact of Russia’s invasion of Ukraine can be found here.