Commission Statement on consulting Member States on proposal on the future of the State aid Temporary Framework

Commission Statement on consulting Member States on proposal on the future of the State aid Temporary Framework

Today, the European Commission has sent to Member States for consultation a draft proposal to prolong until 30 June 2022 the State aid Temporary Framework, while setting out the path for the progressive phase-out of crisis support in light of the ongoing recovery of the European economy. In this context, to further accelerate the recovery, the proposal also adjusts the scope of the Temporary Framework by enabling forward-looking investment and solvency support measures for a limited duration.

The Commission initially adopted the Temporary Framework on 19 March 2020. To-date, the Commission has taken more than 650 decisions in all Member States, including based on the Temporary Framework, to enable necessary and proportionate support worth more than in total €3 trillion to companies affected by the coronavirus outbreak.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “We are finally seeing light at the end of the tunnel, with the European economy bouncing back strongly, thanks to the impressive progress made with vaccinations and the re-opening of our social and economic lives. At the same time, we need to be aware of disparities across Member States and the need to avoid cliff-edge effects when withdrawing public support. We are therefore proposing a progressive phase-out of crisis support measures to enable Member States and industry to adjust, accompanied by measures to kick-start and crowd-in private investment in the recovery phase. We will decide on the way forward taking into account the views of all Member States and the need to preserve effective competition in the Single Market.

As already announced at the time of the last extension of the Temporary Framework in January 2021, the Commission is now deciding on the future of the existing Framework in view of the economic developments, while preserving the level playing field in the Single Market. In particular, according to the Commission’s summer 2021 Economic Forecast, GDP is forecast to grow by 4.8% in 2021 and 4.5% in 2022 in both the EU and the euro area. The proposal also takes into account initial feedback received from Member States in the context of a survey launched by the Commission on 1 June 2021.

On this basis, the Commission is proposing a limited prolongation of the existing measures under the Temporary Framework until 30 June 2022, as well as a number of targeted adjustments. In light of the observed economic recovery, the proposed limited prolongation of the Temporary Framework would ensure that businesses still affected by the crisis will not be cut-off suddenly from necessary support, but rather enable a coordinated phase-out of the support. Such phase-out also has to be seen in light of the heterogeneity of the recovery among different sectors in different Member States.

Furthermore, the Commission proposes to extend the scope of the Temporary Framework to support and accelerate the ongoing economic recovery while preserving effective competition, by enabling Member States to grant for a limited period beyond 30 June 2022:

  • Investment support measures towards a sustainable recovery, in order to help Member States address the investment gap left behind by the crisis. The measures should include safeguards to avoid undue distortions to competition, such as the fact that they should target a wide group of beneficiaries and be limited in size; and
  • Solvency support measures to leverage private funds and investment in undertakings, in particular small and medium-sized enterprises (SMEs) and small mid-caps, who typically rely on bank loan financing and may be even more indebted after the crisis. These measures would provide these companies with the access to equity financing, through private intermediaries, that is often difficult for them to attract individually.   

Member States now have the possibility to comment on the Commission’s draft proposal. The Commission will decide on the way forward, also taking into account the feedback received.

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.

Source: State aid Temporary Framework (europa.eu)

Photo Credit : https://pixabay.com/de/photos/europa-palast-europa-flaggen-5414757/

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