ANNOUNCEMENT 19 Mar 2020

In March 2020, the European Commission adopted a Temporary Framework to permit certain financial support schemes to be introduced under the EU state aid rules. The decision follows the COVID-19 outbreak. 

NUMBER OF INTERVENTIONS

1

  • 0 harmful
  • 1 neutral
  • 0 liberalising

SOURCE

European Commission, press release of 19 March 2020, State aid: Commission adopts Temporary Framework to enable Member States to further support the economy in the COVID-19 outbreak: https://ec.europa.eu/commission/presscorner/detail/en/IP_20_496

COMMUNICATION FROM THE COMMISSION, Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, issued on 19 March 2020: https://ec.europa.eu/competition/state_aid/what_is_new/sa_covid19_temporary-framework.pdf

Update April 2020
European Commission, press release of 3 April 2020: State aid: Commission extends Temporary Framework to enable Member States to accelerate research, testing and production of coronavirus relevant products, to protect jobs and to further support the economy in the coronavirus outbreak *: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_570

European Commission, press release of 8 May 2020, State aid: Commission expands Temporary Framework to recapitalisation and subordinated debt measures to further support the economy in the context of the coronavirus outbreak: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_838

Update October 2020
European Commission, press release of 13 October 2020, State aid: Commission prolongs and expands Temporary Framework to further support companies facing significant turnover losses: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1872

Official Journal of the European Union, CI 340/1 of 13 October 2020, Communication from the Commission, 4th Amendment to the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak and amendment to the Annex to the Communication from the Commission to the Member States on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to short-term export-credit insurance: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.CI.2020.340.01.0001.01.ENG&toc=OJ:C:2020:340I:TOC

Update February 2021
European Commission, press release of 28 January 2021, State aid: Commission prolongs and further expands Temporary Framework to support economy in context of coronavirus outbreak *: https://ec.europa.eu/commission/presscorner/detail/en/ip_21_261

Official Journal of the European Union, CI 34/06 of 1 February 2021, Fifth Amendment to the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak and amendment to the Annex to the Communication from the Commission to the Member States on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to short-term export-credit insurance: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.C_.2021.034.01.0006.01.ENG&toc=OJ%3AC%3A2021%3A034%3ATOC

Inception date: No inception date

State aid, unspecified

On 19 March 2020, the European Commission adopted a Temporary Framework permitting EU member states and the United Kingdom under the state aid rules to introduce certain financial support schemes to support the economy following the outbreak of COVID-19. The new framework is introduced under Article 107(3)(b) of the Treaty on the Functioning of the European Union.

More specifically, the European Commission expanded the framework to allow schemes granting direct grants, tax relief and other selective advantages, loan guarantees, favourable loans, credit lines to banks, and export credit insurance.

The Framework includes a number of restrictions in order to limit the "negative consequences to the level playing field in the Single Market." The Commission hereto highlights that support for example in the form of subsidies loans and guarantees must be relative in scale to the economic activity of the beneficiary e.g. in terms of turnover, liquidity needs or wage bills. The purpose of the schemes shall, therefore, enable companies to overcome and recover from the negative economic effects following the COVID-19 outbreak.

In this context, Margrethe Vestager, the Executive Vice President of the EU Commission and in charge of competition policy, stated in a press release: "The economic impact of the COVID-19 outbreak is severe. We need to act fast to manage the impact as much as we can. And we need to act in a coordinated manner. This new Temporary Framework enables Member States to use the full flexibility foreseen under State aid rules to support the economy at this difficult time."

Notably, the EU Commission can adopt such temporary frameworks under Article 107(2)(b) of the Treaty on the Functioning of the European Union to allow Member States to compensate local companies for financial effects caused by "exceptional occurrences" such as the COVID-19 outbreak where specific sectors were particular white including the aviation and tourism. Notably, the Commission also adopted a Temporary Framework in 2008 in response to the global financial crisis.

The Framework is in force until 31 December 2020 with the exception of certain recapitalisation measures which may be in force until 30 June 2021. Any schemes approved and adopted under the framework must subsequently also only be in place until the end of the year. A number of schemes were introduced following the EU Commission's adoption of the Temporary Framework, see related state acts.  

Updates

On 3 April and 8 May 2020, the European Commission amended the Temporary framework expanding the list of beneficiaries and activities permitted to receive aid. 

On 13 October 2020, the European Commission extended the Temporary framework for a period of six months until 30 June 2021 with the exception of certain recapitalisation support measures which are prolonged for three months until 30 September 2021. In this context, Executive Vice-President Margrethe Vestager stated in a press release "The Temporary Framework has supported Member States in their efforts to deal with the effects of the crisis. Today, we prolong the Temporary Framework to cater for the continued needs of businesses, while protecting the EU's Single Market. We also introduce a new measure to enable Member States to support companies facing significant turnover losses by contributing to part of their uncovered fixed costs. Finally, we introduce new possibilities for the State to exit from recapitalised companies while maintaining its previous stake in those companies and limiting distortions to competition." Additionally, the framework was expanded to allow support to companies' "fixed costs that are not covered by their revenues, up to a maximum amount of €3 million per undertaking."

On 1 February 2021, the European Commission extended a communication that prolongs the validity of the Temporary Framework until 31 December 2021. The update also extends the scope by doubling the loan ceilings and allowing the conversion of certain loans into direct grants.

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