COVID-19: The State aid temporary framework has been prolonged
The European Commission has decided to extend its temporary State aid measures to mitigate the adverse effects of the COVID-19 pandemic. At the same time, the Commission has decided to introduce two new measures to support economic recovery.
Background and the extension
The State aid temporary framework, which was introduced to support businesses affected by the COVID-19 outbreak, was set to expire on 31 December 2021. The European Commission has decided to prolong it until 30 June 2022. The framework provisions enable Member States - on certain conditions - to provide, inter alia, the following support:
- Direct grants, selective tax benefits, and advance payments
- State guarantees for bank loans to businesses
- State loans on favourable terms
- Safeguards for banks that channel State aid to the real economy
- Short-term export credit insurance
Two new tools
Additionally, the European Commission also introduced two new tools that may be used by the Member States to support sectors that are still affected by the crisis. The European Commission will consider any use of these tools by the Member States to be in accordance with TFEU Article 107(3)(c). Other minor adjustments have also been made.
The first tool allows Member States to support investments undertaken by companies in the private sector, thus reducing the gap that has been left behind by COVID-19. The investment support must be granted under a scheme that targets a wide group of beneficiaries and cannot, generally, exceed 1% of the total scheme budget per company. However, the scheme may be limited to specific sectors, in particular sectors that are crucial to the green and digital transitions as noted by the European Commission. This tool will be available until 31 December 2022, i.e., also after expiry of the framework provisions.
The second tool is a solvency support measure. It allows Member States to provide guarantees, on certain conditions, for private investments in SMEs and small midcaps with high indebtedness in order to attract equity financing to such companies. The maximum funding is EUR 10 million per company. The tool will be available until 31 December 2023.
Read our previous newsletter on the original temporary framework provisions.
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