Brussels extends the wide sleeve for public aid to companies hit by the pandemic


The European Commission has decided to extend the wide sleeve for public aid to companies hit by the pandemic and the economic crisis caused by the coronavirus. Thus, the Community Executive extends until June 30, 2022 the Temporary framework for state aid, which was due to expire on December 31, 2021. The 27 have provided European companies 3 billion euros since the start of the pandemic, according to Reuters data.


Why companies have not asked for billions in direct aid due to the COVID crisis

Why companies have not asked for billions in direct aid due to the COVID crisis

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The Community Vice-President for Competition, Margrethe Vestager, has stated: “This limited extension allows a gradual and coordinated abolition of crisis measures, without sudden negative effects, and is due to the expected strong recovery of the European economy in general. On the other hand , we will continue to closely monitor the rise in COVID-19 infections and other risks to the economic recovery. And to further drive the recovery, we have introduced two new instruments that seek to revive the economy and attract private investment for a recovery. faster, greener and more digital. ”

The extension adopted this Thursday by the European Commission “will allow states to extend their programs and ensure that companies still affected by the crisis are not suddenly excluded from the necessary support.” In addition, the Commission has made a number of adjustments.

With regard to investment support measures, the European Commission approves, to “help member states address the investment deficit due to the crisis”, that member states may “create investment incentives by companies and use this instrument to accelerate green and digital transitions. Measures include safeguards to avoid undue distortions of competition, for example they should be targeted at a broad group of beneficiaries and their amounts should be limited. Member States can make use of this instrument until December 31, 2022 “.

In relation to solvency support and in order to mobilize private funds that can be used for investments in small and medium-sized enterprises (SMEs), including start-ups and small mid-caps “, Brussels will allow” Member States to grant guarantees to private intermediaries, creating incentives to invest in these types of companies, and provide them with easier access to such equity financing, which they often find difficult to attract on their own. This is especially important in view of the growing levels of corporate indebtedness during the crisis. Member States can use this instrument until December 31, 2023 “.

In addition, among other modifications, the European Commission has extended from June 30, 2022 to June 30, 2023 the possibility for Member States to convert repayable instruments (for example, guarantees, loans, repayable advances) granted under the Temporary Framework in other forms of aid, such as direct grants; has adapted the maximum amounts of certain types of aid in proportion to the extension granted; clarified the application of the exceptional flexibility provisions of the European Commission Rescue and Restructuring Guidelines; and has extended the limited list of countries whose risks are not negotiable, in the context of short-term export credit insurance, for an additional period of 3 months (from December 31, 2021 to March 31, 2022).

Evolution of the public aid framework

The Temporary Framework was adopted on March 19, 2020 and was first modified on April 3, 2020 “To offer more possibilities for public support for research, testing and manufacturing of products to fight the coronavirus pandemic, protect employment and maintain support for the economy,” explains Brussels.

The May 8, 2020, the Commission adopted a second amendment by which the scope of the Temporary Framework was extended to measures relating to recapitalization and subordinated debt.

The June 29, 2020, the Commission adopted a third amendment that broadened the scope of the Temporary Framework “in order to continue supporting micro, small and emerging companies, and to encourage private investment.”

The October 13, 2020, the Commission extended the Temporary Framework until June 30, 2021 (with the exception of the measures related to recapitalization, the extension of which ended on September 30, 2021) and “allowed Member States to cover part of the non-fixed costs. cutlery from companies affected by the crisis “.

The January 28, 2021, the European Commission adopted a fifth modification that broadened the scope of the Temporary Framework, “increasing the maximum limits established in it and allowing the conversion of certain reimbursable instruments into direct grants until the end of 2022”.

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