European Commission approves Dutch guarantee scheme has been saved
European Commission approves Dutch guarantee scheme
The European Commission has given the Netherlands the go-ahead for a EUR 10 billion guarantee scheme to support the Dutch economy.
6 May 2020
The European Union has meanwhile also taken a variety of measures to cushion the economic impact of the corona virus. They give Member States broader possibilities to keep their economies running without this involving prohibited state aid. This newsletter discusses these measures.
The European Commission has adopted a Temporary Framework Scheme within which Member States can support their economies without this qualifying as state aid. The objective of the framework is to ensure that sufficient liquidity remains available for businesses and to protect economic activities during and after the outbreak. State aid rules allow Member States to provide such aid when it is designed to remedy a serious disturbance in the economy of a Member State. In view of the virus’s EU-wide outbreak, all Member States meet this criterion.
Conditions Temporary Framework Scheme
The Temporary Framework is in force until the end of 2020. An assessment will be made by then as to whether its operation should be extended. The Framework provides for five concrete temporary measures which Member States may take. However, these are subject to conditions. Member States should remain within this band width. The measures are:
- Member States may support companies with an amount of EUR 800,000 per company to meet their 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.
- Member States may provide State guarantees so that banks can continue to grant loans to customers who need them.
- Member States may also grant loans at lower interest rates to businesses themselves. Such loans may help enterprises by providing direct working capital and meeting their investment needs.
- Some countries plan to use and build on the lending capacity of banks, in particular to support SMEs through these banks. The framework does not see this as support to banks, but as support to individual customers.
- The framework is flexible with regard to export credit insurance.
Member States remain obliged to notify qualifying measures to the European Commission. The Temporary Framework complements previously allowed possibilities for Member States to take measures - within the state aid frameworks - to combat the economic consequences of Covid-19. The European Commission has already indicated that it is possible for Member States to grant wage subsidies and defer payment of corporate income tax, VAT and social security contributions. In addition, Member States may offer financial support to consumers (e.g. for cancelled services). Member States may also provide financial support to companies, in particular when they have liquidity shortages and are in urgent need of support.
Approval Dutch guarantee scheme
In terms of the Dutch guarantee scheme for loans - with a total value of EUR 10 billion -, on 22 April 2020, the European Commission stated that this is in line with the Temporary Framework Scheme and, thus, does not qualify as prohibited state aid. The Commission has reached this position because (i) the scheme has a temporary character: guarantees are only granted up to 31 December 2020; (ii) the loans for each company are limited to what they need to cover their liquidity requirements for the near future; (iii) the term of the guarantees is limited (capped at six years); (iv) the contributions for the guarantees respect the minimum conditions of the Temporary Framework Scheme; and (v) companies already in trouble on 31 December 2019, do not qualify.
The coronavirus outbreak also has consequences for the functioning of the judiciary. The Court of Justice anticipates holding hearings once again with effect from Monday 25 May 2020. What’s more, the Court of Justice has issued a press release stating that the periods for instituting remedies continue to be fully effective. However, the time limits prescribed in on-going proceedings can be extended by one month.