1 April 2020

EU adopts economic measures in the context of the Covid-19 virus

The Coronavirus outbreak is not only a severe emergency for public health with significant social impact but also a major economic shock to the European Union, calling for a decisive coordinated economic action. Therefore, the European Commission is taking steps to mitigate the socio-economic impact of the outbreak in the EU by helping the Member States to coordinate their national responses.

The European Commission has adopted a Temporary Framework to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the COVID-19 outbreak. Together with many other support measures that can be used by Member States under the existing State aid rules, the Temporary Framework enables Member States to ensure that sufficient liquidity remains available to businesses of all types and to preserve the continuity of economic activity during and after the COVID-19 outbreak.

By the words of Executive Vice-President Margrethe Vestager: “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. And it gives guidance on how to minimise any undue residual aid to the banks in line with EU rules.”

The important fact is that the new Framework does not replace but complements the toolbox with many other possibilities already available to Member States in line with State aid rules – be it general measures to provide wage subsidies and suspension of tax payments for all companies, or providing compensation to companies for damages suffered due to the COVID-19 outbreak.

Furthermore, EU ambassadors have promptly agreed on the Council’s position on two legislative proposals (Proposal for a regulation concerning the Coronavirus Response Investment Initiative and Proposal for a regulation extending the scope of the EU Solidarity Fund) which will free up €37bn funds to support SMEs to alleviate serious liquidity shortages as a result of the Coronavirus outbreak. The European Parliament will now need to agree its position on the new measures (vote expected on 26 March).

The European Parliament will now need to agree its position on the new measures. Once there is an agreement, the Council is expected to adopt the measures by written procedure.


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