EU okays Latvian state aid for exporting firms

The European Commission has authorised, under EU State aid rules, a measure adopted by Latvia to limit the adverse impact of the current financial crisis on exporting firms.

The Commission found the measure to be in line with its Temporary Framework for State aid measures to support access to finance in the current financial and economic crisis. In particular, the measure requires a market-oriented remuneration and tackles the problem of the current unavailability of the short-term export credit insurance cover in the private market. The Commission authorised the measure until 31 December 2010.

Competition Commissioner Joaquín Almunia said: "The short-term export credit insurance scheme provides Latvia with means of supporting firms in the areas where the market is temporarily still not functioning properly while, at the same time, establishing safeguards to limit distortions of competition."

Under the notified scheme, the state agency Latvian Guarantee Agency (LGA) will provide short-term export-credit insurance coverage to companies established in Latvia, that are confronted with the temporary unavailability of cover in the private market for financially sound transactions. LGA will provide the cover based on an assessment of the buyer's creditworthiness and, if needed, on the level of political risk relating to the buyer's country. Maximum coverage available under the public scheme is 90% of the underlying transaction value, which means that the exporters have to retain at least 10% of the risk themselves.

The Commission concluded that the measure complies with the conditions laid down in the Temporary Framework for state aid to business during the crisis. In particular, the measure meets the following criteria:

• The necessary cover has become unavailable on the private insurance market as a consequence of the financial crisis. The unavailability of cover has been demonstrated with evidence provided by well established-exporters in line with the requirements of the Temporary Framework.
• The premiums required by LGA are aligned on those of the private market, as required by the Commission's Communication on short-term export-credit insurance. The premiums charged in the Latvian scheme are set at a level, which provides an incentive for exporters to have recourse to private insurers as soon as sufficient cover is again available on the private market.

The non-confidential version of the decision will be made available under the case number N 84/2009 in the State Aid Register.