State aid: Commission sets out future of Temporary Framework to support economic recovery in context of coronavirus outbreak

Today, the European Commission has decided to prolong until 30 June 2022 the State aid Temporary Framework (currently set to expire by 31 December 2021). In order to further accelerate the recovery, the Commission has also decided to introduce two new measures to create direct incentives for forward-looking private investment and solvency support measures, for an additional limited period.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said “Since the beginning of the pandemic, the State aid Temporary Framework has enabled Member States to provide targeted and proportionate support to businesses in need, while putting in place safeguards to preserve the level playing field in the Single Market.Today, we have prolonged its application for six months, until the end of June next year. The limited prolongation gives the opportunity for a progressive and coordinated phase-out of crisis measures, without creating cliff-edge effects, and reflects the projected strong recovery of the European economy overall. On the other hand, we will continue to closely monitor the rise in COVID-19 infections and other risks to the economic recovery. And to further support the recovery, we have introduced two new tools to kick-start the economy and crowd-in private investment for a faster, greener and more digital recovery.”

In light of the observed economic recovery, the Commission has adopted a limited prolongation of 6 months of the Temporary Framework, until 30 June 2022. This will allow Member States, where needed, to extend their support schemes and ensure that businesses still affected by the crisis will not be cut off suddenly from necessary support. At the same time, the Commission will continue to monitor closely the developments of the COVID-19 pandemic and other risks to the economic recovery.

In addition, the Commission has introduced a number of targeted adjustments, including two new tools to support the ongoing recovery of the European economy in a sustainable way:

• Investment support measures to help Member States address the investment gap left behind by the crisis. Member States may create incentives for investments undertaken by companies and use this tool to accelerate the green and digital transitions. The measure includes safeguards to avoid undue distortions to competition, such as the fact that they should target a wide group of beneficiaries and the aid amounts should be limited in size. This instrument is available to Member States until 31 December 2022; and
• Solvency support measures to leverage private funds and make them available for investments in small and medium-sized enterprises (SMEs), including start-ups, and small midcaps. Member States may grant guarantees to private intermediaries, creating incentives to invest in these types of companies and provide them with easier access to such equity financing that is often difficult for them to attract individually. This is particularly relevant in light of the increasing indebtedness levels of companies during the crisis. This instrument is available to Member Statesuntil 31 December 2023.

Furthermore, among other amendments, the Commission has: i) prolonged from 30 June 2022 until 30 June 2023 the possibility for Member States to convert repayable instruments (e.g. guarantees, loans, repayable advances) granted under the Temporary Framework into other forms of aid, such as direct grants; ii) proportionally adapted to the extended duration the maximum amounts of certain types of aid; iii) clarified the use of the exceptional flexibility provisions of the Commission’s Rescue and Restructuring Guidelines; and iv) prolonged the adjusted list of non-marketable risk countries, in the context of the short-term export credit insurance (STEC), for an additional 3 months (from 31 December 2021 to 31 March 2022).

Background

The State aid Temporary Framework was adopted on 19 March 2020 and first amended on 3 April 2020 to increase possibilities for public support to research, testing and production of products relevant to fight the coronavirus outbreak, to protect jobs and to further support the economy. On 8 May 2020, the Commission adopted a second amendment extending the scope of the Temporary Framework to recapitalisation and subordinated debt measures. On 29 June 2020, the Commission adopted a third amendment extending the scope of the Temporary Framework to further support micro, small and start-up companies and incentivise private investments. On 13 October 2020, the Commission prolonged the Temporary Framework until 30 June 2021 (with the exception of recapitalisation measures that could be granted until 30 September 2021) and enabled Member States to cover part of the uncovered fixed costs of companies affected by the crisis. On 28 January 2021, the Commission adopted a fifth amendment expanding the scope of the Temporary Framework by increasing the ceilings set out in it and by allowing, until the end of 2022, the conversion of certain repayable instruments into direct grants.