Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak
4 April 2020
On 19 March 2020, the European Commission adopted a Temporary Framework to enable EU Member States to adopt financial aid measures to support their economies in the context of the COVID-19 outbreak (the ‘Temporary Framework’), without these measures constituting prohibited state aid. The Temporary Framework is based on article 107(3)(b) of the Treaty on the Functioning of the European Union that permits aid to remedy a serious disturbance in the economy of a Member State to be considered as compatible with the internal market.
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The Temporary Framework provides for five types of measure that Member States may adopt:
- Direct grants, selective tax advantages, and advance payments: Member States may establish schemes to grant companies up to EUR 800,000 to address urgent liquidity needs, through direct subsidies, selective tax breaks, or advance payments. The scheme does not apply to firms that already were in difficulties on 31 December 2019. Separate or additional rules apply to agricultural and fishing businesses.
- State guarantees for loans taken by companies from banks: Member States may provide state guarantees to ensure that banks may continue to provide loans to customers who need them. These state guarantees may cover loans to help businesses cover immediate working capital and investment needs.
- Subsidised public loans to companies: Member States may grant loans at favourable interest rates direct to businesses. These loans may help enterprises by providing direct working capital and meeting their investment needs.
- Safeguards for banks that channel state aid to the real economy: some Member States plan to build on the existing lending capacity of banks, and use them as a channel for support to businesses, in particular small and medium-sized enterprises. The Temporary Framework makes clear that such aid is considered as direct aid to the banks' customers, and not to the banks themselves.
- Short-term export credit insurance: the Temporary Framework is flexible with regard to export credit insurance.
The Temporary Framework was announced to be in place until the end of December 2020, however the European Commission committed to assess before that date whether it needs to be extended further.
Member states remain obliged to notify qualifying measures to the European Commission.