European Commission approves German guarantee measure to further support economy after coronavirus outbreak

The European Commission has today approved another aid scheme notified by Germany to support the German economy as a result of the outbreak of the Coronavirus to be supported. The scheme was approved under the Temporary Framework for State aid to support the economy in the current COVID-19 outbreak, adopted by the Commission on 2020 March 19.

The Executive Vice-President of the Commission responsible for competition policy, Margrethe Vestager explained: “Today we approved a German-notified loan guarantee scheme aimed at companies affected by the outbreak of the coronavirus Coronavirus are affected. This regulation aims to provide companies with sufficient liquidity to maintain jobs and continue business activities in these difficult times. We continue to work with Member States, e.gm to ensure that national support measures can be put in place as quickly and effectively as possible, in line with EU rules.”

The German support measures

Am On March 22, 2020, the commission approved the first German measures. Germany has now notified another support measure to the Commission for approval under the Temporary Framework, to be implemented by the German federal and state authorities as well as development and guarantee banks.

The scheme is open to all companies and enables loan guarantees on favorable terms, which are intended to help cover the immediate working and investment needs of the economy.

The Commission found that the measure notified by Germany fulfills the conditions set out in the Temporary Framework. For example, i) the loan amount underlying a guarantee per company must be in proportion to its foreseeable liquidity needs, ii) guarantees may only be issued until the end of this year and iii) with a maximum term of six years, and iv) companies must pay fixed guarantee premiums.

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

It has therefore approved the measure under EU state aid rules.

background objects

The Commission has adopted a Temporary Framework enabling Member States to make full use of the margin provided for in state aid rules to support the economy in the wake of the coronavirus outbreak. This Temporary Framework provides for five types of aid that Member States can grant:

1. i) Direct grants, repayable advances or selective tax benefits: Member States can introduce schemes to grant individual companies up to EUR 800 000 to meet their urgent liquidity needs.
2. ii) State guarantees for bank loans to companies: Member States can provide state guarantees to ensure that banks continue to lend to corporate customers in need of liquidity to help meet immediate working and investment needs.

(iii) Concessionary public loans to companies: Member States may grant soft loans to companies to help them meet their immediate working and investment needs.

1. (iv) Assurances for banks that channel state aid to the real economy: Some Member States are planning to support businesses, particularly small and medium-sized enterprises, through existing bank lending capacities. The Temporary Framework clarifies that such support measures are considered direct aid to bank customers and not to the banks themselves, and explains how any distortion of competition between banks can be minimised.
2. v) Short-term export credit insurance: The framework makes it easier for member states to demonstrate that certain countries cannot be considered as having marketable risks, allowing the state to provide short-term export credit insurance when needed. On 23 March, the Commission launched an urgent public consultation to determine whether public sector short-term export credit insurance should be made more widely available in the current crisis caused by the coronavirus outbreak. More specifically, the public consultation aims to examine the availability of private short-term export credit insurance for exports to all those countries that are in the 2012 Short-Term Export Credit Insurance Notice be listed as “marketable risk countries”. Depending on the outcome of the consultation and taking into account relevant economic indicators, the Commission may then decide to temporarily remove countries from the list of "marketable risk countries".

The Temporary Framework will apply until the end of December 2020. In order to ensure legal certainty, the Commission will assess before that deadline whether an extension is necessary.

The Temporary Framework complements the wide range of options already available to Member States to mitigate the socio-economic impact of the coronavirus outbreak, in line with EU state aid rules. On March 13, 2020, the commission issued a Communication on a Coordinated Economic Response to the COVID-19Pandemic adopted which explains these possibilities. For example, Member States can make general changes in favor of companies (e.g. tax deferrals or subsidies for short-time work in all sectors of the economy) that are not covered by state aid rules. They can also compensate companies for losses they have incurred as a result of the coronavirus outbreak and are directly attributable to the outbreak.

Once all confidentiality issues have been resolved, the non-confidential version of the decision on the Aid Register on the website of DG competition made available to the Commission under number SA.56787. The electronic newsletter provides information on new state aid decisions published on the Internet and in the Official Journal State Aid Weekly e-news.

More information on the Temporary Framework and other measures taken by the Commission to address the economic impact of the coronavirus pandemic is available here available.

Source: European Commission press release of 24.03.2020/XNUMX/XNUMX