On Wednesday 8 July the European Commission authorised German plans to release €500 billion of liquidity and capital support for enterprise affected by the Covid-19 pandemic. The scheme has been authorised under the Temporary Framework for State aid measures.
According to Margrethe Vestager, Executive Vice-President for Competition Policy, this German fund “ensures that the State is sufficiently remunerated for the risk taxpayers assume, and, as regards recapitalisation measures, that there are incentives for the State to exit as soon as possible, and that the support comes with adequate conditions, including a ban on dividends, bonus payments”.
Germany has notified the establishment of a ('Wirtschaftsstabilisierungsfonds') fund which will take the form of: - guarantees (that are expected to mobilise €400 billion of the total amount); - subsidised debt instruments in form of subordinated loans; - recapitalisation instruments (in total up to €100 billion), in particular equity instruments (acquisition of newly issued ordinary and preferred shares or other forms of shareholding) and hybrid capital instruments (namely convertible bonds and silent participations).
The Commission found the scheme to be in line with the conditions set out in the Temporary Framework: - as regards aid in the form of guarantees (they can cover up to a maximum of 90 % of the risk); - aid in the form of subordinated loans (the scheme is limited in time and provides for an adequate remuneration for the State); - as regards the recapitalisation measures (the support is limited to the amount necessary to ensure the viability of the beneficiaries and does not go beyond restoring their pre-pandemic capital structure, the scheme provides for an adequate remuneration for the State, a dividend ban, a cap on the remuneration of and a ban of bonus payments to management).
Finally, only firms that were not considered to be in difficulty on 31 December 2019 are eligible for the scheme.
In addition to the €500 billion authorised by the Commission today, the fund can raise up to €100 billion to refinance state aid already authorised by the Commission, bringing the total budget of the 'Wirtschaftsstabilisierungsfonds’ to €600 billion.
Furthermore, the Commission approved: - €25 million in Belgian aid for Aviapartner, a provider of ground handling services at Brussels National Airport (Zaventem); - a €23.5 million Hungarian wage subsidy scheme to support the aviation sector; - a €25 million Dutch scheme providing subsidised interest rates for loans to small and micro businesses. (Original version in French by Lionel Changeur)