State aid: Commission approves €100 million Italian guarantee scheme to support SMEs in the agriculture, forestry, fishery and aquaculture sectors affected by the coronavirus outbreak

The European Commission has approved a €100 million Italian State aid scheme to support small and medium-sized enterprises (SMEs) in the agricultural, forestry, fishery and aquaculture sectors in the context of the coronavirus outbreak. The scheme was approved under the State aid Temporary Framework adopted by the Commission on 19 March 2020, as amended on 3 April 2020.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This €100 million scheme will enable Italy, through the provision of State guarantees, to support SMEs active in the agricultural, forestry, fishery and aquaculture sectors, which are currently experiencing difficulties due to the coronavirus outbreak. The scheme will help those businesses cover their immediate liquidity needs, and support them to continue their activities during and after the outbreak. Putting in place the necessary national support measures in a timely, coordinated and effective way, in line with EU rules, is of paramount importance in these challenging times.”

The Italian support measures

Italy notified to the Commission under the amended Temporary Framework a €100 million scheme to support SMEs in the agriculture, forestry, fishery and aquaculture sectors affectedby the coronavirus outbreak.

Under the scheme, support will be granted by the State-owned ISMEA Guarantee Fund, through financial institutions, in the form of:

o  State guarantees on investment and working capital loans;

o  Direct grants, in the form of waiving of the applicable fee on guarantees awarded.

The scheme, which will be open to SMEs active in the agriculture, forestry, fishery and aquaculture sectors, aims at enabling those companies to have access to the financial means they need to cover their immediate working capital and investment needs and maintain their activities.

The Commission found that the measure is in line with the conditions set out in the Temporary Framework notably because:

• With respect to the State guarantees, under the scheme:

o  guarantees on loans covering 100% of the risk can be granted up to a nominal value of €100,000 per company active in the primary agricultural sector, €120,000 per company active in the fishery sector and €800,000 per company active in the forestry sector and in the processing and marketing of agricultural products;

o  in all other cases, (i) guarantees cover up to 90% of risk on loans; (ii) the underlying loan amount per company is limited to what is needed to cover its liquidity needs for the near future, (iii) the guarantees will only be provided until December 2020, (iv) the guarantees are limited to a maximum of six years, and (iv) guarantee fee premiums are in line with the levels set out by the Temporary Framework;

• With respect to the direct grants, the support will not exceed €100,000 per company active in the primary agricultural sector, €120,000 per company active in the fishery sector and €800,000 per company active in the forestry sector or in the processing and marketing of agricultural products.

The Commission concluded that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the Italian economy, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework.

On this basis, the Commission approved the measures under EU State aid rules.

Background

The Commission has adopted a Temporary Framework to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework, as amended on 3 April 2020, provides for the following types of aid, which can be granted by Member States:

(i) Direct grants, equity injections, selective tax advantages and advance payments of up to €100,000 to a company active in the primary agricultural sector, €120,000 to a company active in the fishery and aquaculture sector and €800,000 to a company active in all other sectors to address its urgent liquidity needs. Member States can also give, up to the nominal value of €800,000 per company zero-interest loans or guarantees on loans covering 100% of the risk, except in the primary agriculture sector and in the fishery and aquaculture sector, where the limits of €100,000 and €120,000per company respectively, apply.

(ii) State guarantees for loans taken by companies to ensure banks keep providing loans to the customers who need them. These state guarantees can cover up to 90% of risk on loans to help businesses cover immediate working capital and investment needs.

(iii) Subsidised public loans to companies with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.

(iv) Safeguards for banks that channel State aid to the real economy that such aid is considered as direct aid to the banks’ customers, not to the banks themselves, and gives guidance on how to ensure minimal distortion of competition between banks.

(v) Public short-term export credit insurance for all countries, without the need for the Member State in question to demonstrate that the respective country is temporarily “non-marketable”.

(vi)   Support for coronavirus related research and development (R&D) to address the current health crisis in the form of direct grants, repayable advances or tax advantages. A bonus may be granted for cross-border cooperation projects between Member States.

(vii)  Support for the construction and upscaling of testing facilities to develop and test products (including vaccines, ventilators and protective clothing) useful to tackle the coronavirus outbreak, up to first industrial deployment. This can take the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.

(viii)Support for the production of products relevant to tackle the coronavirus outbreak in the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.

(ix) Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions for those sectors, regions or for types of companies that are hit the hardest by the outbreak.

(x)  Targeted support in the form of wage subsidies for employees for those companies in sectors or regions that have suffered most from the coronavirus outbreak, and would otherwise have had to lay off personnel.

The Temporary Framework enables Member States to combine all support measures with each other, except for loans and guarantees for the same loan and exceeding the thresholds foreseen by the Temporary Framework. It also enables Member States to combine all support measures granted under the Temporary Framework with existing possibilities to grant de minimis to a company of up to €25,000 over three fiscal years for companies active in the primary agricultural sector, €30,000 over three fiscal years for companies active in the fishery and aquaculture sector and €200,000 over three fiscal years for companies active in all other sectors. At the same time, Member States have to commit to avoid undue cumulation of support measures for the same companies to limit support to meet their actual needs.

Furthermore, the Temporary Framework complements the many other possibilities already available to Member States to mitigate the socio-economic impact of the coronavirus outbreak, in line with EU State aid rules. On 13 March 2020, the Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak setting out these possibilities. For example, Member States can make generally applicable changes in favour of businesses (e.g. deferring taxes, or subsidising short-time work across all sectors), which fall outside State Aid rules. They can also grant compensation to companies for damage suffered due to and directly caused by the coronavirus outbreak.

The Temporary Framework will be in place until the end of December 2020. With a view to ensuring legal certainty, the Commission will assess before that date if it needs to be extended.

The non-confidential version of the decision will be made available under the case number SA.57068 in the State aid register on the Commission’s competition website. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

More information on the temporary framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.