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EU's COVID-19 State Aid Temporary Framework

EU's COVID-19 State Aid Temporary Framework
18 March 2020

The COVID-19 outbreak is a severe public health emergency for citizens, societies and economies with infections in all Member States and has  a significant economic impact. Taking into account that governments around the world started shutting down their economies last week, the European Commission has proposed to Member States a State aid Temporary Framework to support the economy, which will be applicable across the entire Union.This proposal is based on the Article 107(3)(b) TFEU to remedy a serious disturbance in the economy.
According to the proposal governments are allowed to grant state aid to companies that are harmed by the coronavirus pandemic. The framework will allow governments

  • to set up programs for direct grants (or tax advantages) up to 500,000 euros to a company,
  • to give subsidized state guarantees on bank loans
  • to enable public and private loans with subsidized interest rates.

The Temporary Framework will also recognize the important role of the banking sector to deal with the economic effects of the pandemic. The Temporary Framework makes clear that, if Member States decide to channel aid to the real economy via banks, this is direct aid to the banks’ customers, not to the banks themselves.

The framework is designed to remedy the liquidity shortage faced by undertakings and ensure that the disruptions caused by the outbreak do not undermine their viability, especially of SMEs. The Temporary Framework is applicable to all companies that entered into difficulty after 31 December 2019.

The framework notes that the lockdown measures enacted by national governments to contain the coronavirus “have an immediate impact on both demand and supply, and hit undertakings and employees, especially in the health, tourism and transport sectors. “But, it adds, “beyond the immediate effects on mobility and trade, the outbreak is also increasingly affecting undertakings in all sectors and of all kinds, small and medium enterprises as well as large undertakings.”The European Commission added its goal is to have the new Temporary Framework in place in the next few days.

At B2EU Consulting, we will continue following the next steps very closely, making sure that our clients are informed of any potential impact that such actions might have. 

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