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COVID-19 has already had a material impact on companies and their business. Flights have been cancelled, restaurants are closed, and people are no longer using public transport. The European Commission has recognised the economic consequences of the pandemic and the measures being taken to contain it and indicated that it will use all tools at its disposal to make sure that "the European economy weathers this storm".

1.    Temporary State Aid Frame Work

On 19 March, the Commission adopted a temporary state aid framework (the "Temporary Framework") to enable Member States to support their economies during the COVID-19 outbreak. The Temporary Framework recognizes that the EU economy as a whole is experiencing a "serious disturbance" which justifies an exemption under the State aid rules. Main goal of the Temporary Framework is to ensure that sufficient liquidity re-mains available to companies.

The Temporary Framework provides for five types of aid:

(i)    Direct grants, selective tax advantages and advance payments: Member States can set up schemes to grant up to EUR 800,000 per company to address urgent liquidity needs.
(ii)    State guarantees for bank loans to companies: Member States can provide state-backed guarantees against favourable premiums to ensure that banks continue to extend loans to corporate customers that need them. The guarantee may relate to both investment and working capital loans.
(iii)    Subsidised public loans to companies: Member states can grant loans at subsidised interest rates to companies to cover immediate working capital and investment needs.
(iv)    Safeguards for banks used to channel State aid to the economy: When banks are used to channel financial support to businesses, such aid is considered direct aid to the banks' customers, not to the banks themselves. The Temporary Framework provides guidance on how to ensure minimal distortion of competition between banks.
(v)    Short-term export credit insurance: The Temporary Framework introduces additional flexibility on how to demonstrate that certain countries are not-marketable risks, thereby enabling short-term export credit insurance to be provided by the government, where needed.

The aid measures mentioned under point (i) may be combined with those described under points (ii), (iii) or (v). However, subsidised public loans (iii) and State guarantees (ii) are mutually exclusive.  

The Temporary Framework supplements the many other possibilities already available to Member States under the existing EU State Aid rules. The Temporary Framework will be in place until the end of 2020, with the possibility of an extension should this prove necessary. The full text of the Temporary Framework as well as the requirements state aid measures must meet in order to fall under the framework can be found here.

2.    State Aid in the event of exceptional occurrences

The current State Aid framework provides for an exemption for measures that aim to remedy a serious disturbance in the economy. The European Commission has established that the situation with respect to COVID-19 qualifies as such a 'serious disturbance'. 

The current framework also allows Member States to take state aid measures to make good damage caused by natural disasters or exceptional occurrences. Accordingly, if the Dutch government decides to provide relief to businesses suffering from the COVID-19 crisis, it is likely that such measures would be classified as falling under one of these exemptions. 

The mere fact that a State Aid measure is covered by an exemption, however, does not mean that the European Commission need not be notified. Before a government can grant financial relief, the individual measure or the scheme must be submitted to and approved by the European Commission.

3.    Expedited notification procedure

For State Aid measures requiring notification, the Commission has set up a special mailbox and telephone number which Member States can use to discuss their plans. In addition, the notification procedure for State Aid has been significantly expedited. For example, a Danish government proposal to compensate a large-scale events organiser for the cancellation of several events was approved within 24 hours. Competition Commissioner Vestager has stated that the Commission will work just as quickly with any Member State that wishes to implement arrangements to compensate businesses for damage caused by COVID-19. 

4.    Freeing up funding: Corona Response Investment Initiative

In order to be able to incentivise their economies, Member States will need funding. Given the limited size of the EU budget, the European Commission indicated that the main response will need to come from Member States' national budgets. However, the Commission is proposing an investment package of EUR 37 billion to finance aid in areas such as short-term work measures, the health care sector, labour market measures, and sectors particularly affected by the current circumstances. The relief measures financed by this investment package and other sources will be implemented by the Member State governments through State Aid programmes, which can be set up quickly thanks to the abovementioned fast-track approval procedure.

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