The European Commission has approved, under EU State aid rules, a €130 million Lithuanian scheme to support and facilitate access to finance by companies affected by the exceptional circumstances resulting from China’s discriminatory trade restrictions on Lithuania.
The Lithuanian measure
Under the scheme, which will run until 31 December 2027 or until the restrictions imposed by China are lifted, whichever happens first, companies that are affected by the exceptional circumstances resulting from China’s discriminatory trade restrictions on Lithuania will be able to receive loans up to €5 million. The scheme will be open to companies from all sectors, except for the finance, agriculture and forestry, as well as fisheries and aquaculture sectors.
This support will allow the affected companies to adapt their business activities to the new market situation, re-orient their business strategies and improve their liquidity to be able to gradually obtain financing in the market from private financial institutions. The loans must be exclusively used for sourcing of (new) inputs from different sources, looking for entering into new business markets or using the time to undertake such efforts. The loans will need to be repaid within 24 months.
The Commission’s assessment
The Commission assessed the measure under EU State aid rules, and in particular under Article 107(3)(c) of the Treaty on the Functioning of the European Union, which enables Member States to support the development of certain economic activities under certain conditions.
The Commission found that the scheme is necessary, appropriate and proportionate to support companies affected by the exceptional circumstances resulting from the Chinese trade restrictions to reorient their business strategies. The exceptional nature of the situation is highlighted, in particular, by the EU’s launch of a case at the World Trade Organization against the Chinese discriminatory trade practices with respect to Lithuania, which threaten the integrity of the EU Single Market. Furthermore, the Commission concluded that the aid will not have undue negative effects on competition and trade in the EU.
On this basis, the Commission approved the scheme under EU State aid rules.
From December 2021, and without informing the EU or Lithuanian authorities, China began to heavily restrict or de facto block imports from and exports to Lithuania, or linked to Lithuania. The Commission has repeatedly raised the matter with the Chinese authorities.
Article 107(3) of the Treaty of the Functioning of the European Union covers categories of aid which may be compatible with the internal market. In particular, Article 107(3)(c) TFEU, allow Member States to grant aid to facilitate the development of economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest.