21 January 2021

The saga continues: the European Commissions’ struggle against the downturn in the EU

You probably remember the “Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak” (“Temporary Framework”), adopted on March 19, 2020 (read more here), during the first wave of the coronavirus outbreak in Europe, which wreaked havoc in all major spheres of state activity of the EU Member States, as well as EU Association countries. Following this, the European Commission (“Commission”) decided to prolong and broaden the scope of the Temporary Framework on October 13, 2020 (article available here).

The end… or a never-ending story?

However, the story did not end in October: the Commission sent a new draft proposal to the Member States for consultation on January 19, 2021. This new proposal aims to prolong the Temporary Framework until December 31, 2021 and further adjust its scope to support the economy in the context of the prolonged disruptions caused by the coronavirus outbreak.

Margrethe Vestager, the Executive Vice-President in charge of competition policy, explained “As the second wave of the coronavirus outbreak continues to deeply affect our lives, businesses across Europe are in need of further support to weather the crisis. That’s why we are proposing to prolong the State aid Temporary Framework until 31 December 2021 and to increase the aid amounts available to companies under certain measures to ensure that effective support remains available.”

What is new?

The draft proposal, sent for consultations, includes the following:

extension of existing provisions of the Temporary Framework until December 31, 2021;
increase of the upper limit of amounts of aid granted under the Temporary Framework (currently up to EUR 120,000 per company active in fishery and aquaculture, EUR 100,000 per company active in primary production of agricultural products, and EUR 800,000 per company active in all other sectors) and for measures contributing to fixed costs of companies which are not covered by their revenues (currently up to EUR 3 million per company); and

ability of the Member States to convert granted repayable instruments (including loans) of up to EUR 800,000 per company (EUR 120,000 per company active in the fishery and aquaculture sector and EUR 100,000 per company active in the primary production of agricultural products) into direct grants.

We will continue to follow how Member States will respond and how Europe moves from crisis management to economic recovery and, of course, keep you posted.