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The new temporary framework for State aid

In order to enable Member States to support the economy more effectively in times of COVID-19, the European Commission uses a tool that we have already encountered during the global financial crisis and adapts it to the current situation. The magic formula is called "COMMUNICATION FROM THE COMMISSION - Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak ", COM (2020) 1863 final ("TFSA"). The TFSA is designed to enable Member States to use the full flexibility foreseen under State Aid to provide sufficient liquidity to affected companies and to cushion the socio-economic impact of the COVID-19 crisis in a joint and coordinated manner.

The TFSA is based on Article 107 para 3 lit b TFEU, according to which “aid to remedy a serious disturbance in the economy of a Member State” may be considered compatible with the internal market. According to the TFSA, such a significant disturbance in the economy of the entire EU is caused by COVID-19: the damages resulting from the crisis could not have been foreseen, are of a significant scale and hence put undertakings in conditions that sharply differ from the market conditions in which they normally operate. In order to tackle the resulting risks (disruption of supply chains, lower consumer demand, uncertainty on investment plans and liquidity constraints, etc.), the TFSA provides for five types of aid, which can be approved quickly after notification by the respective Member State:

1.
direct grants, selective tax advantages and advance payments of up to EUR 800,000 per company.

2.
State guarantees on loans: Member States will be able to provide State guarantees to ensure banks keep providing loans (for a limited period and loan amount) to customers with liquidity needs.

3.
subsidised public loans to companies: Member States will be able to grant loans (for a limited period and loan amount) with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.

4.
Safeguards (in the form of guarantees and loans) channelled through credit institutions and other financial institutions: Some Member States plan to support businesses, in particular SMEs through banks’ existing lending capacities. The TFSA makes clear that such aid is considered direct aid to the banks' customers, not to the banks themselves (since such aid does not have the objective to preserve or restore the viability, liquidity or solvency of the credit institutions), and explains how undue distortions to competition between banks can be kept to a minimum.

5.
short-term export credit insurance: The TFSA makes it easier for affected Member States to demonstrate that, in certain countries cover for marketable risks could be temporarily unavailable, so that the state can offer short-term export credit insurance if necessary.

The financial resources for the aid measures described should - the Commission makes this clear with reference to the limited size of the EU budget - come from Member States’ national budgets.

In addition to the “tools” provided for in the TFSA, Member States can also design measures in line with:

  • the General Block Exemption Regulation. A notification of the measure is not required in this case.
  • Article 107 para 3 lit c TFEU (in conjunction with the rescue and restructuring guidelines). Member States can notify to the Commission aid schemes to meet acute liquidity needs and to support undertakings facing financial difficulties also due to or aggravated by the COVID-19.
  • Art 107 para 2 lit b TFEU to compensate undertakings in sectors particularly affected by the outbreak (e.g. transport, tourism, culture, hospitality and retail) and/or organisers of cancelled events for damage suffered due to and directly caused by the outbreak (even if they have already received aid under the rescue and restructuring guidelines). Such compensation measures must be notified to the Commission.

 

The TFSA will not be applied after December 2020; the Commission may review it before that date and decide on an extension, if necessary.

The first aid schemes have already been approved on the basis of the TFSA (exemplary selection):

1.
France (SA.56709): guarantees for loans limited in period and amount; volume: EUR 300 billion.

2. 
Germany (SA.56714): two notified support measures; (i) loan programme, loan period limited to five years, risk coverage up to 90% of the loan; volume: up to EUR 1 billion (ii) loan programme of the German Förderbank Kreditanstalt für Wiederaufbau in cooperation with private banks, risk coverage up to 80% of the loan (loan amount may not exceed 50% of the total debt volume on the beneficiary’s balance sheet).

3. 
Germany (SA.56790): direct grants ("Bundesregelung Kleinbeihilfen 2020"); volume: approx. EUR 45 billion.

4. 
Portugal (SA.56755): four guarantee schemes for 1. tourism, 2. restaurants (and similar activities), 3. extractive and manufacturing industries and 4. travel agencies, touristic animation, event organisation (and similar activities); volume: EUR 3 billion.

5.
Italy (SA.56786): aid scheme to promote the production and supply of medical and personal protective equipment; volume: EUR 50 million.

6. 
Denmark (SA.56708): guarantee scheme approved for small and medium-sized enterprises (SMEs) affected by the COVID-19 crisis; volume: EUR 130 million.

7. 
Spain (SA56803): three guarantee schemes on new loans and refinancing operations; volume: around EUR 20 billion.

The decisions are (soon) available at https://ec.europa.eu/competition/elojade/isef/index.cfm?fuseaction=dsp_sa_by_date.

 

Please note: This newsletter merely provides general information and does not constitute legal advice of any kind from Binder Grösswang Rechtsanwälte GmbH. The newsletter cannot replace individual legal consultation. Binder Grösswang Rechtsanwälte GmbH assumes no liability whatsoever for the content and correctness of the newsletter.



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