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Dolores Utrilla
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17th March 2020
Competition & State Aid Covid-19

Commission’s draft proposal for a State aid Temporary Framework in response to the COVID-19 outbreak

Last night, the European Commission sent a draft proposal for a State aid Temporary Framework to support the economy in the context of the COVID-19 outbreak to Member States for consultation. The proposal is based on Article 107(3)(b) TFEU, to remedy serious disruptions to the EU economy.

The proposed Temporary Framework would enable Member States to set up schemes for direct grants (or tax advantages) of up to EUR 500,000 to a company. It would also allow the granting of subsidised State guarantees on bank loans, as well as enable public and private loans with subsidised interest rates. Finally, the proposed Temporary Framework would recognise the important role of the banking sector to deal with the economic effects of the COVID-19 outbreak, namely to channel aid to final customers, in particular small and medium-sized enterprises.

Companies that experienced 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 taxpayer support unrelated to the COVID-19 outbreak. Furthermore, the Temporary Framework also foresees general transparency obligations.

The new Framework will not replace but complement the other possibilities already available to Member States under State aid rules, which include inter alia general measures to provide wage subsidies and suspension of tax payments for all companies, or providing compensation to companies for damage suffered due to the COVID-19 outbreak. Compensation can in particular be useful to support particularly affected sectors, such as the airlines sector.

In a statement made today, Commission’s Executive Vice-President Margrethe Vestager explained the content of the proposed Temporary Framework and announced the Commission’s will to have it in place in the next few days. She also made clear that aid enabled by these rules will be directed to the banks’ customers, not to the banks themselves.

According to Vice-President Vestager, the new temporary rules will enable Member States to act with the utmost flexibility possible under State aid rules. The proposed framework pursues two main goals, namely to ensure that businesses have the liquidity to keep operating or to put a temporary freeze on their activities if needed, on the one hand, and to ensure that such support does not undermine the single market, on the other hand.

Vice-President Vestager also announced that the Commission is already working on templates to facilitate the design of State aid measures aimed at tackling the impact of the COVID-19 outbreak, the first of which (on compensation of companies for damage) will be published online today. She also announced that the Commission has set up a mailbox and a dedicated phone line for Member States concerning extraordinary State aid measures.

The draft proposal has not yet been published. The statement by Vice-President Vestager is available here.

For a better understanding of this issue, read today’s Op-Ed by Jorge Juan Piernas López (here), on the potential of State aid rules to face the COVID-19 crisis in light of the previous response of the Commission to the 2008 financial crisis.

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