COVID-19: EC Rapidly Approves 21 State Aid Schemes under the Temporary Framework

In the week following the adoption of the Temporary Framework for EU State aid measures to counter the economic impact of the COVID-19 pandemic on March 19, 2020,1 the European Commission (the ‘EC’) has approved twenty-one State aid schemes notified by EU Member States and the United Kingdom (‘the UK’), expecting this “just to be the beginning,”2 of what may be necessary to remedy the economic effects of the Coronavirus outbreak.

The background on the EC’s initial response to the outbreak and its adoption of the Temporary Framework were previously summarized in our prior client alert. In addition to the Temporary Framework, the traditional State aid tools are still available for use by Member States.

State Measures under the Temporary Framework.The EC concluded that the State aid schemes notified by Germany, France, Italy, Spain, Denmark, Portugal, Luxembourg and Latvia, as well as the UK were necessary, appropriate and proportionate to remedy the serious disturbance in the economyof these Member States caused by the pandemic and in compliance with the conditions set out in the new Temporary Framework.

  • The approved State aid measures are in the form of direct grants, repayable advance payments, State guarantees and subsidized loans, and include safeguards for the channeling of the aid by banks to the beneficiaries.
  • Most of the schemes aim at covering operating costs, safeguarding jobs and ensuring economic activity during and after the pandemic, while one scheme is directed at meeting the rising demand for medical devices and personal protection equipment by incentivizing their production and supply.
  • As regards the French, Spanish, Danish, Portuguese and Latvian support measures, the EC also noted that the approved schemes ensure that banks, through minimum remuneration requirements and other safeguards, will effectively channel the aid to the companies which need it.

The measures notified by the EU Member States and the UK that are approved by the EC are outlined below.

WilmerHale has formed a Coronavirus (COVID-19) Task Force to lead the legal and strategic counselling of clients around the world in response to the outbreak. The task force consists of WilmerHale lawyers in multiple key disciplines. The Crisis Management and Strategic Response Group is also involved in helping clients respond to these challenges.

WilmerHale’s European Antitrust and Competition team is closely following these issues. The lawyers listed below would be happy to answer any follow-up questions that readers may have.

German Support Measures. The EC has approved several support measures notified by Germany under the Temporary Framework:

  • A scheme to support companies with direct grants, repayable advance or tax and payment advantages[1] where the aid does not exceed the limits per company set in the Temporary Framework. The scheme, called “Bundesregelung Kleinbeihilfen 2020” (Federal Small Aid Scheme) aims to remedy the sudden shortages of liquidity faced by companies and help ensure that the disruptions caused by the coronavirus outbreak do not undermine their viability.
  • Two loan programs implemented through the German promotional bank Kreditanstalt für Wiederaufbau (the ‘KfW’). These programs allow the KfW, in cooperation with commercial banks, to provide liquidity in the form of subsidized loans to affected companies.4 In its assessment, the EC considered that the loan amounts per company were linked to the liquidity needs of companies, that loans would only be provided until the end of 2020, and would be limited to a maximum of six-year duration. The schemes also ensure that the banks will pass on the advantages of the subsidized loans to companies in need. The two measures provide for:
    • A loan program covering up to 90% of the risk for loans for companies of all sizes. Eligible loans may have a maturity of up to 5 years and can reach EUR 1 billion (approx. USD 1.1 billion) per company;
    • A loan program in which a consortium of KfW and private banks provides larger loans. The State may cover up to 80% of the risk for an individual loan, and up to 50% of the total debt of a company.
  • A guarantee scheme for loans taken out by all companies affected by the pandemic, implemented through the German federal and regional authorities, as well as promotional and guarantee banks.5 In addition to the conditions considered in the guarantee scheme above the EC took into consideration that the guarantee premiums that companies would pay were in line with the Temporary Framework.

British Support Measures. The EC has approved two UK State aid measures with a total budget of GBP 600 million (approx. USD 708 million) in the form of (i) a guarantee scheme for small and medium sized enterprises (‘SMEs’)with a turnover of up to GBP 45 million (approx. USD 53 million); and (ii) a direct grant scheme for SMEs affected by the virus.6 (EU law, including the EU State aid rules, continues to apply in the UK during the transition period for British exit from the EU under the UK EU Withdrawal Agreement.)

  • More specifically, in its assessment of the guarantee scheme, the EC considered that the loan amount per company was linked to the company’s needs, the loan was limited to a maximum of six-year duration and entailed a guarantee premium that was in line with that set in the Temporary Framework.
  • As for the direct grant scheme, the support per company was linked to the relevant sector and was limited to the maximum amounts set in the Temporary Framework. The schemes will be in effect until September 30, 2020, with a possibility of extension until the end of 2020.

French Support Measures. The EC has approved three State aid schemes notified by France, mobilizing more than EUR 300 billion (approx. USD 320 billion) for companies affected by the outbreak:7

  • Two schemes providing State guarantees, through the French public investment bank Bpifrance, on (i) commercial loans and (ii) credit lines for companies with up to 5,000 employees; and
  • A scheme providing State guarantees to banks on portfolios of new loansfor all types of companies. It is emphasized that this is a direct aid to all types of companies with safeguards for banks to pass on the advantages to the final beneficiaries.

The EC considered that these schemes provide State guarantees on loans with a limited maturity and size while limiting the risk taken by the State to a maximum of 90%.

Spanish Support Measures. The EC has approved two Spanish guarantee schemes on new loans and refinancing operations, with a total budget of EUR 20 billion for affected (i) SMEs and self-employed workers and (ii) larger companies.8 The measures provide guarantees on operating loans and limit the risk taken by the State to a maximum of (i) 80% for SMEs and self-employed workers; and (ii) 70% for larger companies. The EC considered that these measures were in compliance with the Temporary Framework.

Spain plans to ensure that the affected companies and self-employed workers can have liquidity to safeguard jobs and continue their activities through these measures.

Danish Support Measures. The EC has approved a Danish guarantee scheme with a budget of EUR 130 million (approx. USD 140 million) for SMEs affected by Coronavirus outbreak.9

In particular, this scheme provides State guarantees for operating loans to SMEs, for them to continue their business activities despite the pandemic. The operating loans would be limited by maturity and size while controlling the risk taken by the State to a maximum of 70%.

Portuguese Support Measures. The EC has approved four Portuguese guarantee schemes for SMEs and mid-caps which are affected by the outbreak and are active in the following sectors: (i) tourism; (ii) restaurants (and similar activities); (iii) extractive and manufacturing industry; and (iv) travel agency activities, touristic animation, event organization (and similar activities). The total budget for these guarantee schemes is EUR 3 billion (approx. USD 3.2 billion).10

The schemes provide State guarantees for issuing operating loans to such companies for them to have sufficient liquidity to safeguard jobs and continue their business through the hardship caused by the outbreak.

The operating loans would be limited by maturity and size while limiting the risk taken by the State to a maximum of 90%.

Luxembourgish Support Measures. Luxembourg notified a scheme with a budget of EUR 300 million (approx. USD 325 million) to support companies and liberal professions covering their operating costs during the pandemic crisis.11 The EC approved the scheme which is designed as repayable advances of up to EUR 500,000 (approx. USD 540,000) per company granted in one or more instalments.

Latvian Support Measures. The EC approved two Latvian schemes which provide (i) loans with subsidized interest rates with limited maturity and size, and (ii) loan guarantees with reduced guarantee fees for companies affected by the outbreak.12 The total budget of the schemes, EUR 250 million (approx. USD 270 million), will be covered from the State budget and the budget of international financial institutions. The State’s risk per loan is limited to a maximum of 50%.

Italian Support Measures. The EC approved two support measures notified by Italy under the Temporary Framework:

  • A EUR 50 million (approx. USD 54 million) Italian aid schemefor the production and supply of medical devices and personal protection equipment. The scheme is designed in light of the strong demand for medical devices (e.g., ventilators) and personal protection equipment (e.g., masks, goggles, gowns) caused by the pandemic.13 Italy will make financial support available to all companies provided that they: (i) set up new facilities for the production of medical devices and personal protection equipment; (ii) expand the production of their existing structures producing such equipment; or (iii) convert their production line to that effect. The companies benefiting from this scheme will make the output available to the Italian authorities at the market prices applied in December 2019 (i.e., prior to the outbreak in Italy). The aid will take the form of either direct grants or repayable advances not exceeding EUR 800,000 (approx. USD 860,000) per company.
  • A guarantee scheme running until September 30, 2020, in support of a debt moratorium from banks to SMEs affected by the outbreak.14 This measure includes the postponement of repayments of overdraft facilities, bank advances, bullet loans, mortgages and leasing operations. The guarantee, which extends for 18 months after the end of the moratorium, covers the payment obligations falling under the moratorium. The State’s risk is limited to 30% and financial intermediaries can rely on the guarantee after having made recovery efforts themselves. Eligible beneficiaries are required not to have non-performing exposures prior to March 17, 2020 and to show that their business activity suffered as a consequence of the coronavirus outbreak.

Traditional State Aid Instruments -- Traditional State aid instruments are still available to Member States, that make use of them.

  • The EC has recently approved a Danish scheme with a budget of DKK 10 billion (approx. USD 1.4 billion) to compensate self-employed for damage arising from the outbreak.15 Under the scheme, that will be in effect until June 9, 2020, Denmark will cover 75% of the expected loss over a period of three months, to the maximum amount of DKK 23,000 (approx. USD 3,250). This approval was not under the Temporary Framework, which is based on Article 107(3)(b) of the Treaty on the Functioning of the European Union (“TFEU”). Rather, the EC assessed the scheme under Article 107(2)(b) TFEU, which allows national measures to compensate specific companies or specific sectors (in the form of schemes) for the damage suffered due and directly caused by exceptional occurrences, such as the coronavirus outbreak.
  • This is the second compensation measure where the EC has considered the COVID-19 outbreak as an “exceptional occurrence”, the first one, too, being another Danish scheme to compensate organizers of large events.16


We expect the EC to continue taking swift decisions on State aid measures notified by EU Member States and the UK, addressing the economic impact of the Coronavirus pandemic.

On March 26, 2020, the EFTA Surveillance Authority (which is responsible for monitoring State aid for Norway, Iceland and Liechtenstein in the European Economic Area) also approvedNorway’s plan to guarantee up to 50 billion Norwegian kroner (approx. USD 4.7 billion) in loans to affected SMEs taking into account the EU Temporary Framework. Through this scheme, the Norwegian authorities will provide public guarantees on investment and working capital loans that credit institutions grant to SMEs to meet their liquidity needs.

On March 23, 2020 the EC launched an urgent public consultation on the availability of private short-term export-credit insurance capacity in view of the economic impact of the Coronavirus outbreak.17 Depending on the results of the consultation and the relevant economic indicators, the EC may decide to temporarily remove countries from the list of “marketable risk countries” provided in the 2012 Short-term export-credit Communication.18 Removal of a country from the list would allow public insurance for such risks. The Temporary Framework provides guidance on how EU Member States may demonstrate the unavailability of the private insurance market.19

With thanks to Alessia Varieschi and Su Şimşek for their assistance.