Temporary flexibility in EU State aid rules to mitigate difficulties caused by the COVID-19 outbreak
On 19 March 2020, the European Commission issued a communication on its Temporary Framework which considerably relaxed the EU State aid rules, thereby enabling Member States to effectively respond to the exceptional economic difficulties caused by the COVID-19 outbreak. The measures introduced under the communication would be temporary and in force until the end of 2020. The purpose of the Temporary Framework is to enable Member States to use a wide range of measures to ensure that sufficient financing and liquidity remains available to businesses of all types during the crisis.
This will facilitate the granting of a comprehensive package proposed by the Finnish Government on 20 March 2020 to companies facing financial difficulties due to the COVID-19 outbreak.
Under the Communication, aid may be granted to companies that are facing difficulties due to the emergency conditions caused by the coronavirus. Meanwhile, aid will not be granted to companies that were in financial difficulties on or before 31 December 2019. All support measures referred to in the Communication require a notification of State aid to the Commission, and their introduction requires prior approval by the Commission.
The Communication provides for the following types of aid:
- Temporary aid schemes: Member States will be able to set up schemes to grant up to EUR 800,000 to a company to address its urgent liquidity needs. Aid may be granted in the form of direct grants, advance payments and selective tax advantages to cover any costs of the company in question.
- Loans and guarantees at below the market rate: Member States will be able to grant loans with favourable interest rates to companies to help businesses cover immediate working capital and investment needs, provided that the more detailed criteria set out in the Communication are met.
- Loans and guarantees at below market rate from financial institutions: Loans and guarantees at below market rate can also be granted through credit institutions or financial institutions. In this case, particular attention must be paid to ensuring that the final beneficiary gets the maximum benefit.
- More flexible rules on short-term export credit insurance: The Communication facilitates the procedure under which Member States’ public insurers (Finnvera in Finland) may grant export credit insurance to countries where, due to difficulties caused by the COVID-19 outbreak, such insurance is temporarily not available on the private insurance market.
The new Commission communication provides more flexibility to the State aid rules in addition to measures already introduced. On 13 March 2020, the Commission announced that Member States could exceptionally grant direct aid to cover direct damage caused by the coronavirus, for example to event organisers whose events have been cancelled.
The introduction of aid measures to compensate for direct damage also requires notification of State aid to the Commission and prior approval by the Commission. The Commission has promised to fast track State aid notifications relating to the coronavirus epidemic.
Olli Hyvärinen, Senior Ministerial Adviser, Ministry of Economic Affairs and Employment, tel. +358 29 504 7026