News

European Commission prolongs and further expands the Covid-19 State aid Framework

01.02.2021

Background

On 19 March 2020, the European Commission adopted the “Temporary Framework for State aid measures to support the economy in the current Covid-19 outbreak” (“Framework”). This was a very rapid response by Brussels as it was able to draw on the experiences of the global financial crisis of 2008/2009, when the European Commission also took action under State aid law by adopting a temporary Community framework.

The Framework in this instance was originally intended to apply until 31 December 2020. However, due to the progression of the coronavirus pandemic, it has since been expanded four times and prolonged until 30 June 2021 (see our latest news on 29.06.2020).

On 28 January 2021, the European Commission now adopted the fifth amendment, once again expanding and prolonging the Framework. Margrethe Vestager, Executive Vice-President with responsibility for competition policy, explained the context as follows: “As the coronavirus pandemic is lasting longer than we had all hoped, we must continue to ensure that the Member States can offer companies the necessary support to cope with the crisis.”

Key new features

Extension until 31 December 2021

The Framework was intended, in principle, to expire on 30 June 2021 with one exception for recapitalisation measures, the granting of which was to be permitted until 30 September 2021. All provisions on State aid measures contained in the Framework, including the recapitalisation measures, will now be prolonged until 31 December 2021.

Higher ceilings on State aid for certain support measures

With regard to limited State aid amounts and fixed costs not covered by revenues, the permitted State aid ceilings will be raised. The Member States had previously given information to the European Commission stating that at a number of companies in certain sectors the previous limits had been (almost) reached or appeared to be insufficient.

Limited State aid amounts: The highest rate of limited State aid amounts permitted to be granted on the basis of the Framework will be effectively doubled for each company. The new ceiling is generally EUR 1.8 million per company (previously EUR 800,000). These aid amounts can, as before, be combined with de minimis State aid (up to EUR 200,000 per company) over a period of three financial years.

Fixed costs not covered: For companies particularly hard hit by the coronavirus crisis which experienced turnover losses of at least 30% in the eligible period compared to the same period in 2019, Germany can grant an amount of up to EUR 10 million per company (previously EUR 3 million) to pay fixed costs that are not covered.

Conversion of repayable instruments into direct grants

The amendment to the Framework also aims to create incentives for the Member States to grant aid primarily in the form of repayable instruments.

The Member States now have the option of converting repayable State aid measures (such as guarantees, loans or repayable advances) which are granted on the basis of the Framework into other forms of State aid, such as direct grants, up to 31 December 2022, provided the Framework requirements are met. In particular, as a general rule a conversion may not exceed the new ceilings on limited State aid amounts.

Existing State aid

The Member States can amend existing State aid measures approved by the European Commission on the basis of the Framework in order to prolong them until 31 December 2021. They can also increase the budget for ongoing measures or introduce other changes to measures to adapt them to the amended Framework. In these cases, Member States have the option of pooling the changes in the form of a block notification to the European Commission.