Executive Vice-President Vestager has announced on 17 March 2020 a public consultation on the European Commission’s draft proposal for a State aid Temporary Framework to support the economy in the context of the COVID-19 outbreak. The draft is being discussed with the Member States.
The Temporary Framework will be based on Article 107(3)(b) TFEU to remedy a serious disturbance across the EU economy. Only companies that encountered difficulties after 31 December 2019 will be eligible for aid under this Temporary Framework to ensure that it is not used for public support unrelated to the COVID-19 outbreak.
Member States will be allowed to:
1- set up schemes for direct grants or tax advantages up to €500,000 to companies to meet urgent liquidity needs;
2- give subsidised State guarantees on bank loans, in the form of subsidised premiums, with reductions on the estimated market rate for annual premiums for new guarantees for SMEs and large companies:
The guarantees may cover up to 90% of the amount of the bank loans which are based on the operating needs of the companies (established on the basis of the wage bills or liquidity needs). The guarantees may relate to both investment and working capital loans;
3- enable public and private loans with subsidised interest rates:
The interest rate of these loans must be equal to no less than 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 large companies. The maximum loan amount is based on the operating needs of the companies (established on the basis of the wage bills or liquidity needs). The loans may relate to both investment and working capital needs.
Such aid schemes will have to be notified by the Member States to the European Commission prior to implementation and will be authorised until 30 September 2020. The Commission has already demonstrated its reactivity last week by authorizing a Danish aid scheme within 24 hours.
Furthermore, Member States may put in place general measures such as wage subsidies and suspension of tax payments for all companies. These do not constitute State aid and need not be notified to the European Commission.
Finally, Member States may provide compensation to companies for damages suffered due to the COVID-19 outbreak. The European Commission suggests that Member States apply this solution to compensate airlines under Article 107(2)(b) TFEU for damages suffered due to the COVID-19 outbreak.
CMS will keep you informed of the adoption of the Temporary Framework and of the public measures adopted by Member States in order to support your business enterprises.
Annabelle Lepièce
Partner, Brussels
