On the evening of 16 March, the European Commission sent to Member States for consultation a draft proposal for a State aid Temporary Framework to support the economy in the context of the COVID-19 outbreak. This framework is based on Article 107(3)(b) of the Treaty in order to remedy a serious disturbance across the EU economy.
Commission Vice-President Margrethe Vestager said that swift action was needed to allow companies to “have the liquidity to keep operating, or to put a temporary freeze on their activities, if need be”. It is also important, she stressed, that support for businesses in one Member State “does not undermine the unity that Europe needs, especially during a crisis”.
“We should adopt this framework in the coming days, we will have more details then”, said a Commission spokeswoman.
Mrs Vestager indicated, by way of example, that compensation could be granted to airlines under Article 107(2)(b) of the Treaty for damage suffered as a result of the COVID-19 outbreak, even if they had received rescue aid over the last ten years.
The Commission is also working on templates to facilitate the work to design measures to tackle the impact of the outbreak. The first one on how to compensate companies for damages will be put online on 17 March, Mrs Vestager announced.
The proposed new temporary framework will allow four types of aid: - direct grant or a tax advantage; - State guarantees for bank loans taken out by companies; - public and private loans to companies with subsidised interest rates; - channelling aid to the real economy via banks.
Aid in the form of direct grant or tax advantage. Member States would be able to set up schemes to grant up to 500,000 euros to a company to address its urgent liquidity needs. This can be done through a direct grant or a tax advantage.
Aid in the form of subsidised guarantees on bank loans. Member States can grant State guarantees or set up guarantee schemes supporting bank loans taken out by companies. These schemes would have subsidised premiums, with reductions on the estimated market rate for annual premiums for new guarantees for SMEs and non-SMEs. There are some limits foreseen on the maximum loan amount, which are based on the operating needs of the companies (established on the basis of the wage bills or liquidity needs). Guarantees may relate to both investment and working capital loans.
Aid in the form of subsidised interest rates. Member States can enable public and private loans to companies with subsidised interest rates. These loans must be granted at an interest rate, which is at least equal to the base rate applicable on 1 January 2020 plus the credit risk premium corresponding to the risk profile of the recipient, with different rates for SMEs and non-SMEs. The base rate is fixed in order to provide more certainty on the financing conditions in this volatile context. There are limits regarding the maximum loan amount, which are based on the operating needs of the companies. Loans may relate to both investment and working capital needs.
Banking sector. The Temporary Framework makes clear that, if Member States decide to channel aid to the real economy via banks, this is direct aid to the banks’ customers, not to the banks themselves. It also gives guidance on how to minimise any undue residual aid to banks and to make sure that the aid is 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.
Should direct aid to banks become necessary under Article 107(2)(b) of the Treaty to compensate for the damage resulting directly from the COVID-19 outbreak, such aid would not be considered as extraordinary public support under State aid rules. Similarly, this would also apply to any residual indirect aid granted to banks under the Temporary Framework.
Companies that entered into difficulty after 31 December 2019 are eligible for aid under this Temporary Framework. This is to ensure that the Temporary Framework is not used for aid unrelated to the COVID-19 outbreak. Furthermore, the Temporary Framework also foresees general transparency obligations. (Original version in French by Lionel Changeur)