EU mulls over extending the COVID-19 Temporary Framework on State Aid
On 2 October 2020, the European Commission announced that it is considering extending the COVID-19 Temporary Framework on State Aid until 30 June 2021.
On 19 March 2020, the European Commission adopted the COVID-19 State aid Temporary Framework. The Framework gives guidance to EU Member States on what State aid they may give to businesses to cope with COVID-19.
The Temporary Framework was amended on 3 April 2020, 8 May 2020 and 29 June 2020. The Framework is currently valid until 31 December 2020.
On 2 October 2020, the European Commission announced that it is consulting the EU Member States on a proposal to prolong and adjust COVID-19 State aid Temporary Framework. The Commission is proposing to extend the current Temporary Framework until 30 June 2021.
The European Commission's Vice-President Margrethe Vestager (in charge of competition policy) said: "over the past seven months, our State Aid Temporary Framework has paved the way for almost €3tn of Member State potential support to businesses hit hardest by the coronavirus crisis. The effects of the crisis will stay with us for a while. That's why we are proposing to prolong the Temporary Framework until mid-next year and adjust it to continued needs of businesses, while protecting the EU's Single Market. We will decide on the way forward taking into account the views of all Member States. In parallel, we are working on the way forward to enable Europe's green and digital recovery – our State aid rules will play an important role guiding Member States to ensure that limited public funds are well targeted, do not crowd out private investments and seize the benefits of effective competition.“
The Commission's draft proposal is designed:
- to prolong at the current limits the existing provisions of the Temporary Framework (including for liquidity support) for an additional six months until 30 June 2021. The objective is to enable Member States to support businesses in the context of the coronavirus crisis, especially where the need or ability to use the Temporary Framework has not fully materialised so far, while protecting the level playing field;
- to extend the scope of the Temporary Framework, taking into account the continued economic uncertainty and the needs of businesses with significant turnover losses, by enabling Member States to contribute to the fixed costs of companies that are not covered by their revenues. Supporting businesses by contributing to part of their costs on a temporary basis aims at preventing the deterioration of their capital, maintaining their business activity and providing them with a strong platform to recover; and
- to adapt the conditions for recapitalisation measures under the Temporary Framework, in particular for the State's exit from enterprises where the State was an existing shareholder prior to the recapitalisation. The proposed changes would allow the State to exit from the equity of such enterprises through an independent valuation, whilst maintaining the safeguards to preserve effective competition in the Single Market.
At this stage, Member States now have the possibility to comment on the Commission's draft proposal. Businesses who believe that the Temporary Framework needs to be continued should consider lobbying the relevant EU Member States about the need to extend the duration of the Framework.
For more information on this topic please contact Dr Vincent Power, Partner or any member of A&L Goodbody's EU, Competition & Procurement team.
Date published: 5 October 2020