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The EU Commission approves the modification of three existing Spanish State aid schemes in order to support the economy in the COVID-19 crisis

State aid: Commission approves modification of Spanish schemes, including €10 billion budget increase for aid of limited amount, to further support economy in context of coronavirus outbreak*

The European Commission has found the modification of three existing Spanish schemes to support the economy in the context of the coronavirus outbreak to be in in line with the State aid Temporary Framework.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The amendments we have approved today will help Spanish companies preserve economic activity in these difficult times by adapting and enhancing existing Spanish schemes already in force. For example, Spain has made use of the possibility under the State aid Temporary Framework to first grant repayable instruments that can be converted into grants, if it becomes necessary. We continue to work in close cooperation with Member States to find workable solutions to mitigate the economic impact of the Coronavirus outbreak, in line with EU rules.

The Spanish schemes

The three modified and prolonged existing Spanish schemes are:

  • The first Spanish “umbrella” scheme, providing limited amounts of aid, guarantees on loans, subsidised loans and support for uncovered fixed costs to companies and the self-employed affected by the coronavirus outbreak, which was approved by the Commission on 2 April 2020 and subsequently amended on 24 April 2020, 22 October 2020, 11 December 2020 and 19 February 2021;
  • The second Spanish “umbrella” scheme, providing support for research and development, testing and production of coronavirus relevant products as well as wage subsidies and deferrals of tax and social security contributions, which was approved on 24 April 2020 and prolonged for the first time on 23 December 2020; and
  • The Spanish recapitalisation fund, which was approved on 31 July 2020 and prolonged for the first time on 23 December 2020.

All three schemes are prolonged until 31 December 2021.

For the first “umbrella” scheme, the following additional modifications are included, which reflect the conditions set out in the Temporary Framework:

  • A €10 billion increase in the budget for limited amounts of aid, from €3.65 billion to €13.65 billion;
  • Aid ceilings for limited amounts of aid are increased to €225,000 per company active in the primary production of agricultural products (previously €100,000); €270,000 per company active in the fishery and aquaculture sector (previously €120,000), and €1.8 million per company active in all other sectors (previously €800,000);
  • Authorities will be able to grant guarantees up to 8 years on newly issued subordinated debt instruments;
  • Authorities will be allowed to convert repayable aid instruments granted under the existing schemes, including guarantees issued by ICO on senior loans, into more favourable instruments such as grants until 31 December 2022, under the conditions and within the thresholds fixed in the Temporary Framework for limited amounts of aid. This will, in particular, allow the conversion of guarantees into grants as well as the extension of maturities of existing guaranteed loans and the conversion of existing guaranteed senior loans into participating loans.

For the two “umbrella” schemes, micro and small enterprises will be eligible for aid related to research development and innovation even if they were in difficulty already on 31 December 2019.

The Commission concluded that the schemes, as amended, remain necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, and contribute to fight the health crisis, in line with Article 107(3)(b) and Article 107(3)(c) TFEU and the conditions set out in the Temporary Framework.

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

Background

The 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 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:

  1. Direct grants, equity injections, selective tax advantages and advance payments of up to €225,000 to a company active in the primary agricultural sector, €270,000 to a company active in the fishery and aquaculture sector and €1.8 million to a company active in all other sectors to address its urgent liquidity needs. Member States can also give, up to the nominal value of €1.8 million per company zero-interest loans or guarantees on loans covering 100% of the risk, except in the primary agriculture sector and in the fishery and aquaculture sector, where the limits of €225,000 and €270,000 per company respectively, apply.
  2. State guarantees for loans taken by companies to ensure banks keep providing loans to the customers who need them. These state guarantees can cover up to 90% of risk on loans to help businesses cover immediate working capital and investment needs.
  3. Subsidised public loans to companies (senior and subordinated debt) with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.
  4. Safeguards for banks that channel State aid to the real economy 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.
  5. Public short-term export credit insurance for all countries, without the need for the Member State in question to demonstrate that the respective country is temporarily “non-marketable”.
  6. Support for coronavirus related research and development (R&D) to address the current health crisis in the form of direct grants, repayable advances or tax advantages. A bonus may be granted for cross-border cooperation projects between Member States.
  7. Support for the construction and upscaling of testing facilities to develop and test products (including vaccines, ventilators and protective clothing) useful to tackle the coronavirus outbreak, up to first industrial deployment. This can take the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.
  8. 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. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.
  9. Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions for those sectors, regions or for types of companies that are hit the hardest by the outbreak.
  10. Targeted support in the form of wage subsidies for employees for those companies in sectors or regions that have suffered most from the coronavirus outbreak, and would otherwise have had to lay off personnel.
  11. Targeted recapitalisation aid to non-financial companies, if no other appropriate solution is available. Safeguards are in place to avoid undue distortions of competition in the Single Market: conditions on the necessity, appropriateness and size of intervention; conditions on the State’s entry in the capital of companies and remuneration; conditions regarding the exit of the State from the capital of the companies concerned; conditions regarding governance including dividend ban and remuneration caps for senior management; prohibition of cross-subsidisation and acquisition ban and additional measures to limit competition distortions; transparency and reporting requirements.
  12. Support for uncovered fixed costs for companies facing a decline in turnover during the eligible period of at least 30% compared to the same period of 2019 in the context of the coronavirus outbreak. The support will contribute to a part of the beneficiaries’ fixed costs that are not covered by their revenues, up to a maximum amount of €10 million per undertaking.

The Commission will also enable Member States to convert until 31 December 2022 repayable instruments (e.g. guarantees, loans, repayable advances) granted under the Temporary Framework into other forms of aid, such as direct grants, provided the conditions of the Temporary Framework are met.

The Temporary Framework enables Member States to combine all support measures with each other, except for loans and guarantees for the same loan and exceeding the thresholds foreseen by the Temporary Framework. It also enables Member States to combine all support measures granted under the Temporary Framework with existing possibilities to grant de minimis to a company of up to €25,000 over three fiscal years for companies active in the primary agricultural sector, €30,000 over three fiscal years for companies active in the fishery and aquaculture sector and €200,000 over three fiscal years for companies active in all other sectors. At the same time, Member States have to commit to avoid undue cumulation of support measures for the same companies to limit support to meet their actual needs.

Furthermore, the Temporary Framework complements the many other possibilities already available to Member States to mitigate the socio-economic impact of the coronavirus 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 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.61875 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.

*This is the original title of the press release. The title above has been amended in order to match the e-Competitions format. Individual authors are welcome to provide original independent commentaries on the case law. Articles are subject to approval by the Board of e-Competitions Bulletin before publication based on the Editorial Policy (click here).

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European Commission, The EU Commission approves the modification of three existing Spanish State aid schemes in order to support the economy in the COVID-19 crisis, 23 March 2021, e-Competitions April 2021 - II, Art. N° 99839

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