Coronavirus: EU set to relax state aid rules to support Europe's economy

(BRUSSELS) - The EU Commission sent a proposal to Member States Monday for a temporary state aid framework to support Europe's businesses in the context of the shocks the corona virus is causing to the economy.

The need now was for decisive action, said Commission executive vice-president Margrethe Vestager, and the EU had to act fast and in a coordinated manner: "EU State aid rules provide a toolbox for Member States to take swift and effective action. […] Our aim is to have the new Temporary Framework in place in the next few days," she said.

The new Temporary Framework will enable Member States to (i) set up schemes direct grants (or tax advantages) up to €500,000 to a company, (ii) give subsidised State guarantees on bank loans, (iii) enable public and private loans with subsidised interest rates. Finally (iv), the new Temporary Framework will recognise the important role of the banking sector to deal with the economic effects of the COVID-19 outbreak, namely to channel aid to final customers, in particular small and medium-sized enterprises.

The Temporary Framework makes clear that such aid is direct aid to the banks' customers, not to the banks themselves. It also gives guidance on how to minimise any undue residual aid to the banks in line with EU rules.

As an example, in order to minimise permanent layoffs and damage to the European aviation sector, the Commission says it is ready to work with Member States immediately to "find workable solutions that preserve this important part of our economy, using the full flexibility under State aid rules".

For example, compensation would be able to be granted to airlines under Article 107(2)(b) TFEU for damages suffered due to the COVID-19 outbreak, even if they have received rescue aid in the last ten years. In other words, the “one time last time” principle does not apply.