The EU Commission approves German measures to support economy in COVID-19 outbreak

State aid: Commission approves German measures to support economy in Coronavirus outbreak*

The European Commission has approved two German State aid schemes to support the German economy in the context of the Coronavirus outbreak. The schemes were approved under the State aid Temporary Framework to support the economy in the context of the COVID-19 outbreak adopted by the Commission on 19 March 2020.

Executive Vice President Margrethe Vestager, in charge of competition policy, said: "A few days ago, the German government announced its plans to provide liquidity to the German economy to manage the effects of the economic impact of the Coronavirus outbreak. Today, we approved a number of German measures, shortly after adopting our new State aid Temporary Framework. We are working with Member States to ensure that national support measures can be put in place as quickly and effectively as possible, in line with EU rules.”

The German support measures

Germany notified to the Commission two separate support measures under the Temporary Framework, implemented through the German promotional bank Kreditanstalt für Wiederaufbau (“KfW”):

  1. A loan programme covering up to 90% of the risk for loans for companies of all sizes. Eligible loans may have a maturity of up to 5 years and can reach €1 billion per company, depending on the company’s liquidity needs.
  2. A loan programme in which the KfW participates together with private banks to provide larger loans as a consortium. For this scheme, the risk taken by the State may cover up to 80% of a specific loan but not more than 50% of total debt of a company.

The measures will allow the KfW to provide liquidity in the form of subsidised loans to companies affected by the Coronavirus outbreak. This happens in close cooperation with commercial banks.

The Commission found that the German measures are in line with the conditions set out in the Temporary Framework. In particular, the loan amount per company is linked to cover its liquidity needs for the foreseeable future, loans will only be provided until the end of this year and are limited to a maximum six-year duration. Furthermore, in its agreements with the commercial banks, the KfW will ensure that the advantage offered by the subsidised loans is passed on to the companies that need the liquidity.

The Commission concluded that the measures are 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 Framework.

On this basis, the Commission approved the measure 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 provides for five types of aid which can be granted by Member States:

  1. Direct grants, selective tax advantages and advance payments: Member States will be able to set up schemes to grant up to €800,000 to a company to address its urgent liquidity needs.
  2. State guarantees for loans taken by companies from banks: Member States will be able to provide State guarantees to ensure banks keep providing loans to the customers who need them. These state guarantees can cover loans to help businesses cover immediate working capital and investment needs.
  3. Subsidised public loans to companies: Member States will be able to grant loans 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: Some Member States plan to build on banks’ existing lending capacities, and use them as a channel for support to businesses – in particular to small and medium-sized companies. The Framework makes clear 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. Short-term export credit insurance: The Framework introduces additional flexibility on how to demonstrate that certain countries are not-marketable risks, thereby enabling short-term export credit insurance to be provided by the State where needed. The Commission will continue monitoring the situation and stands ready to amend the list of marketable risk countries if needed.

The Temporary Framework will be in place until the end of December 2020. With a view to ensuring legal certainty, the Commission will assess before that date if it needs to be extended.

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 non-confidential version of the decision will be made available under the case number SA.56714 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 State Aid 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 German measures to support economy in COVID-19 outbreak, 22 March 2020, e-Competitions March 2020, Art. N° 94024

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