The EU Commission adopts the communication on the coordinated economic response to the COVID-19 outbreak

In the wake of the Covid-19 outbreak and its repercussions on businesses, Member States announced that they will adopt all necessary measures to help undertakings in difficulty. The Commission, well-aware of this, has already adopted measures to guide Member States and ensure that their aid measures comply with State aid rules.

First, on 13 March 2020, the Commission adopted the Communication on the Coordinated economic response to the COVID-19 outbreak. Insofar as the EU State aid rules are concerned, the Communication, in essence, lists the options available to Member States that fall outside the scope of EU State aid control (e.g., non-discriminatory measures applicable to all undertakings, such as a suspension of payments of corporate tax) and/or that are allowed under the existing State aid legislation.

Second, on 19 March 2020, the Commission adopted the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak (“Covid- 19 Temporary Framework”), which complements the above-mentioned Communication. The Covid-19 Temporary Framework outlines the conditions that the Commission will apply in the context of the analysis of aid granted by Member States under Article 107(3)(b) TFEU.

As a general rule, Member States must notify their planned State aid to the Commission and demonstrate that it is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of the Member State concerned. Moreover, the aid must comply with the specific conditions set out in the Covid-19 Temporary Framework. In essence, this Temporary Framework identifies five categories of State aid that can, under certain conditions, be authorised.

1. Direct grants, selective tax advantages and advance payments: i.e., “temporary limited amounts of aid to undertakings that find themselves facing a sudden shortage or even unavailability of liquidity” of up to € 800,000 per undertaking, which should be granted no later than 31 December 2020 (with specific provisions for agricultural, fisheries and aquaculture sectors for which the maximum amount is lower).

2. State guarantees for loans taken by companies from banks: this type of State aid is described as “public guarantees on loans for a limited period and loan amount”, with minimum levels of guarantee premiums and specific limits on the amount of the loan principal for loans with a maturity beyond 31 December 2020. The duration of the guarantee is maximum six years and the guarantee cannot cover the entirety of the loan principal.

3. Subsidised public loans to companies: subsidised interest rates for loans of maximum six years, with specific limits on the amount of loans with a maturity beyond 31 December 2020, are authorised, provided that several conditions are met. It should be noted that the same loan cannot benefit from both a State guarantee under point 2 above and a subsidised interest rate.

4. Guarantees and loans channelled through credit institutions or other financial institutions: aid that will benefit “undertakings facing a sudden liquidity shortage [...] through credit institutions and other financial institutions as financial intermediaries”. In order to limit distortions to competition, Member State must ensure that “[t]he financial intermediary shall be able to demonstrate that it operates a mechanism that ensures that the advantages are passed on to the largest extent possible to the final beneficiaries in the form of higher volumes of financing, riskier portfolios, lower collateral requirements, lower guarantee premiums or lower interest rates”.

5. Short-term export credit insurance: marketable risks (i.e., commercial and political risks on public and non-public debtors established in certain countries) cannot as a general rule be covered by export- credit insurance with the support of Member States. However, due to the current outbreak, “certain coun- tries cover for marketable risks could be temporarily unavailable”. In this context, the Covid-19 Temporary Framework gives Member States some flexibility on how to demonstrate that certain countries are non-marketable risks, which will allow them to offer short-term export credit insurance.

The Covid-19 Temporary Framework will be applied by the Commission to all relevant notified measures as of 19 March 2020 (even if the measures were notified prior to that date) and until 31 December 2020.

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Author

  • Van Bael & Bellis (Brussels)

Quotation

Markus Wellinger, The EU Commission adopts the communication on the coordinated economic response to the COVID-19 outbreak, 13 March 2020, e-Competitions March 2020, Art. N° 94006

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