Coronavirus crisis: the European Commission extends its State aid Temporary Framework to support the economy

Europe

The European Commission adopted on 19 March 2020 the adapted Temporary Framework to allow Member States to grant more generous aid over a longer period until the end of December 2020. 

The Temporary Framework is based on Article 107(3)(b) TFEU to remedy a serious disturbance across the EU economy. Only companies that encountered difficulties after 31 December 2019 are eligible for aid under this Temporary Framework to ensure that it is not used for public support unrelated to the COVID-19 outbreak.

Member States are allowed until 31 December 2020 to:

  1. set up schemes for direct grants or tax advantages up to €800,000 to companies to meet urgent liquidity needs;

  2. give subsidised State guarantees on new bank loans, in the form of subsidised premiums, based on a straight forward table set up by the Commission in function of the size of the beneficiairy (SME or large entreprises) and the maturity of the loan

  3. enable public and private loans with subsidised interest rates:

  4. loosen up the rules on Short-term export credit insurance.

In the case of aid in the form of public guarantees and reduced interest rates, certain safeguards should be introduced in relation to the possible indirect aid in favour of the credit institutions or other financial institutions to limit undue distortions to competition. Indeed, the credit institution and other financial institutions, should to the largest extent possible, pass on the advantages of the aid to the final beneficiaries.

All aid schemes provided for by the Temporary Framework have to be notified by the Member States to the European Commission prior to implementation and will be authorised until 30 December 2020.

The Commission has already adopted more than 20 decisions on national schemes based on the Temporary Framework.

In order to enable Member States to accelerate the research, testing and production of coronavirus relevant products and to further support the economy in the context of the coronavirus outbreak, the Commission extended on 3 April 2020 the Temporary Framework by providing for five additional categories of aid :

  1. Support for coronavirus related research and development  in the form of direct grants, repayable advances or tax advantages for coronavirus and other relevant antiviral R&D;

  2. Support for the construction and upscaling of testing facilities in the form of direct grants, tax advantages, repayable advances and no-loss guarantees to support investments enabling the construction or upscaling of infrastructures needed to develop and test products useful to tackle the coronavirus outbreak, to the moment of first industrial deployment;

  3. Support for the production of products relevant to tackle the coronavirus outbreak in the form of direct grants, tax advantages, repayable advances and no-loss guarantees to support investments enabling the rapid production of coronavirus-relevant products (listed in the Framework).

  4. Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions for the sectors, regions or for types of companies that are hit the hardest by the outbreak.

  5. Targeted support in the form of wage subsidies for employees in sectors or regions that have suffered most from the coronavirus outbreak, and that would otherwise have had to lay off personnel.

Furthermore, the amendment to the Temporary Framework modifies certain rules set out in the first Framework in order to clarify these rules or to slacken certain conditions. For instance, a Member State may notify a guarantee scheme with its own duration, premiums and guarantee coverage. More flexibility is also allowed for subsidised loans scheme.

It should be recalled, Member States may put in place general measures such as wage subsidies and suspension of tax payments for all companies. These do not constitute State aid and need not be notified to the European Commission.

Finally, Member States may provide compensation to companies for damages suffered due to the COVID-19 outbreak. The European Commission suggests that Member States apply this solution to compensate airlines under Article 107(2)(b) TFEU for damages suffered due to the COVID-19 outbreak. It has published on 18 March 2020 the list of information to be provided by Member States for notifications of such aid.

It is now up to the Member States to set up further public support for the economy in view of the new categories of aid that have been allowed by the European Commission.

CMS keeps you informed of the public measures adopted by Member States in order to support your business enterprises.

CMS has the widest coverage and the broadest team of state aid specialists in Europe. Furthermore, we have extensive experience in setting up aid schemes and in public interventions in favour of undertakings in difficulty.

Please refer to our brochure for the CMS contact in your jurisdiction.