European Commission extends temporary State aid framework until 30 June 2021
The European Commission introduced more flexibility to State aid rules in the spring and summer due to the coronavirus epidemic. On 13 October 2020, the Commission issued a Communication extending the scope of the less stringent rules mainly until 30 June 2021. The aim is to give the Member States a wide range of tools to support companies and to mitigate the adverse economic effects of the coronavirus pandemic.
The Commission Communication facilitates the coordination of Finnish business funding programmes with EU State aid rules. It will also enable, if needed, the continuation of business funding programmes related to the coronavirus pandemic and the introduction of new business support programmes. In Finland’s view, the more flexible rules are necessary to overcome the economic crisis, but they should remain temporary.
The more flexible rules on State aid were originally set to expire on 31 December 2020. The Commission will now extend their validity by six months. The more flexible rules on recapitalisation, which were to remain in force until the end of June 2021, have been extended to 30 September 2021. The Commission will reassess the need for further extensions of all temporary State aid rules in spring 2021.
New supplements and concessions to the rules
In addition to extending their validity, the temporary rules will be supplemented to allow the granting of aid to companies whose turnover has declined significantly as a result of the coronavirus pandemic compared to the corresponding period in 2019.
In addition, the Commission has eased the criteria regarding public support in the form of equity. The new rules will make it easier for the State to discontinue the recapitalisation of companies in which it already holds shares.
The Commission did not change the maximum limit with which the Member States can support the liquidity of companies. The support that States can offer to a single company may not exceed EUR 800,000.
Flexibility helps mitigate the pandemic’s economic impact
On 19 March 2020, the Commission adopted temporary State aid rules to provide more flexibility on EU State aid rules due to the exceptional economic situation caused by the coronavirus. Subsequently, the temporary rules have been amended and extended three times in the spring and summer.
The more flexible rules have helped to improve the liquidity of companies that have faced difficulties as a result of the coronavirus pandemic. The temporary rules have also facilitated the targeting of the aid to COVID-19 relevant research and development and to investments. In addition, public support in the form of equity is permitted for companies with solvency problems. The rules have also made it possible to grant aid to micro and small companies that were already in financial difficulties before the onset of the coronavirus epidemic.
The temporary State aid rules have played an important role in mitigating the negative economic effects of the coronavirus pandemic. Under the temporary rules, the Commission has approved more than 300 support measures with a total preliminary budget of approximately EUR 3 trillion.
The use of temporary State aid rules requires a State aid notification by Member States to the Commission and the Commission’s prior approval.
Olli Hyvärinen, Senior Ministerial Adviser, Ministry of Economic Affairs and Employment, tel. +358 29 504 7026
Tanja Müller, Senior Specialist, Ministry of Economic Affairs and Employment, tel. +358 29 504 7068