The EC approves public aid from Germany to its companies due to the pandemic

The European Commission (EC) authorized on Sunday the plans of the German Government to provide liquidity to its companies through state-subsidized loans to deal with the coronavirus, measures that have been approved thanks to the relaxation of aid rules for State.

"The Commission concluded that the measures are necessary, appropriate and proportional to remedy a serious disturbance in the economy of a member state," the community executive said in a statement, stressing that they are in line with the temporary measures adopted to facilitate the granting of State support.

Specifically, Germany has received authorization for two credit granting programs through its national promotion bank KfW, the equivalent of the Official Credit Institute in Spain.

The first of these will allow the public bank to cover up to 90% of the risks of loans to medium and large companies that have a maturity of up to five years and do not exceed 1,000 million euros per company.

The second will allow KfW and private banks to provide loans through a consortium in which the State will cover up to 80% of the risk of a specific loan, but not more than 50% of the company's total debt.

Berlin plans to give up to half a trillion euros in liquidity with these measures, according to the German government when announcing the package a few days ago.

"These measures will allow KfW to provide liquidity in the form of subsidized loans to companies affected by the coronavirus outbreak. This will be done in close cooperation with commercial banks," the Commission explained.

The Community Executive has given the green light considering that the measures are in line with the Temporary Framework for State Aid launched in the wake of the pandemic, since the loans will only cover liquidity needs in the near future, they will be granted only until the end of this year and will be limited to a maximum of six years in duration.

According to Brussels, KfW agreements with commercial banks will ensure that the benefits they receive through these subsidized loans are effectively passed on to companies.

The European Union adopted this Temporary Framework on March 19, which will allow States, in an exceptional way, to channel aid in the form of fiscal advantages, guarantees and public loans to companies, and support to banks to face the economic impact of the coronavirus .

This system, which was already used in 2009 during the financial crisis, allows Brussels to authorize public aid that under normal circumstances would not be accepted as long as it is "intended to remedy a serious disturbance in the economy of a Member State".


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