Commission lengthens terms of state aid temporary rules

It will further support companies facing significant turnover losses due to Covid-19 crisis

Photo: EU Margrethe Vestager.

The EU executive has decided on Tuesday to lengthen and extend the scope of the state aid Temporary Framework adopted on 19 March this year to support the economy in the context of the Covid-19 outbreak. All sections of the Temporary Framework that were initially set to expire at the end of this year are now prolonged for six months until 30 June 2021.

The section to enable recapitalisation support is prolonged for three months until 30 September 2021. The Temporary Framework has supported Member States in their efforts to deal with the effects of the crisis.

We prolong the Temporary Framework to cater for the continued needs of businesses, while protecting the EU's Single Market and we also introduce a new measure to enable Member States to support companies facing significant turnover losses by contributing to part of their uncovered fixed costs, Executive Vice-President Margrethe Vestager, in charge of competition policy, said. She specified that the Commission introduces new possibilities for the state to exit from recapitalised companies while maintaining its previous stake in those companies and limiting distortions to competition.

New amendment prolongs at current thresholds the provisions of the Temporary Framework for an additional six months until 30 June 2021, except the recapitalisation measures which are prolonged for three months until 30 September 2021.

The goal is to enable Member States to support businesses in the context of the coronavirus crisis, especially where the need or ability to use the Temporary Framework has not fully materialised so far, while protecting the level playing field. Before 30 June 2021, the Commission will review and examine the need to further prolong or adapt the Temporary Framework.

A new measure was introduced to enable Member States to support companies facing a decline in turnover during the eligible period of at least 30% compared to the same period of 2019 due to the coronavirus outbreak. The support will contribute to a part of the beneficiaries' fixed costs that are not covered by their revenues, up to a maximum amount of €3m per undertaking.

Propping up these companies by contributing to part of their costs on a temporary basis aims at preventing the deterioration of their capital, maintaining their business activity and providing them with a strong platform to recover. This allows more targeted aid to companies that demonstrably need it.

The conditions for recapitalisation measures under the Temporary Framework were also adapted, in particular for the state's exit from the recapitalisation of enterprises where the state was an existing shareholder prior to the recapitalisation. The amendment allows the state to exit from the equity of such enterprises through an independent valuation, whilst restoring its previous shareholding and maintaining the safeguards to preserve effective competition in the Single Market.

Considering the continued general lack of sufficient private capacity to cover all economically justifiable risks for exports to countries from the list of marketable risk countries, the amendment provides for an extension until 30 June 2021 of the temporary removal of all countries from the list of “marketable risk" countries under the Short-term export-credit insurance Communication.

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