Coronavirus (COVID-19) (GEN - 1095.00)

European Commission communication on a coordinated economic response and proposal for a State Aid Temporary Framework

GEN - 1095.00.png

© Copyright European Union 2020
© Copyright European Union 2020

GEN - 1095.00. On Friday, 13 March, the EU Commission published a communication outlining a series of measures that it is taking to mitigate the consequences of the COVID-19 pandemic. Even though health issues are a national competence, the European Commission plans actions in four areas to support the Member States. Moreover, on 16 March, the Commission has sent to the Member States a draft proposal for a State Aid Temporary Framework to support the economy in the context of the outbreak. This Temporary Framework will allow full flexibility for Member States under the ‘State aid rules’.

COVID-19 outbreak

This outbreak is causing serious disturbance across the EU economy, including the HVACR industry.  For manufacturers there can be disturbances in the supply chain and within the workforce, if these are infected by the virus.

The European Commission has been looking in detail at the rule applying to State Aid and is now proposing a Temporary Framework that should enable Member States to respond to the situation.

Commission objectives

The measures the European Commission has taken aim to:

  • Ensure the necessary supplies to the EU’s health systems by preserving the integrity of the Single Market and of production and distribution of value chains
  • Support people so that income and jobs are not affected disproportionally and to avoid permanent effect of this crisis
  • Support firms and ensure that the liquidity of the EU’s financial sector can continue to support the economy
  • Allow Member States to act in a coordinated way, through using the full flexibility of the EU’s State Aid and Stability and Growth Pact Frameworks

Commission actions

The four actions are:

  • State Aid Framework Flexibility, using Articles 107(2)(b) and 107(3)(b) of the Treaty on the Functioning of the EU allowing Member States to take exceptional national support measures to the econ.
  • European Fiscal Framework Flexibility, using the special circumstance of the COVID-19 pandemic being an ‘unusual events outside the control of government’. This allows for exceptional spending in the areas of health care and targeted relief measures for companies and workers. Also, the Commission will recommend adjusting the fiscal efforts required from Member States in case of negative growth or large drops in activity and could move towards proposing to the Council to activate the general escape clause to accommodate a more general fiscal policy support.
  • Ensuring solidarity in the Single Market, with a Commission guidance to the Member States on how to put in place adequate control mechanisms to ensure security of supply, an accelerated joint procurement procedure for all goods necessary to fight the pandemic, and a recommendation on non-CE-marked protective equipment. Other targeted measures concern the banking, transport and tourism sectors.
  • Mobilising the EU budget, with 1bn EUR redirected from the EU budget as a guarantee to the European Investment Fund to incentivise banks to provide liquidity to SMEs and midcaps, the creation of a Coronavirus Response Investment Initiative aiming to direct 37bn EUR under the EU cohesion policy to the fight against the pandemic, using in particular unspent money the Structural Funds. It also proposes to extend the scope of the EU Solidarity Fund by including a public health crisis (800m EUR are available in 2020).

Temporary Framework (2020-03-16 update)

This framework will enable Member States to:

  • Set up schemes of direct grants (or tax advantages) up to 500.000 EUR to a company that has entered difficulties after 31 December 2019
  • Give subsidised state guarantees on bank loans
  • Enable public and private loans with subsidised interest rates
  • Ensure that aid channelled via the banks is not considered as direct aid to the banks but to the banks’ customers, giving guidance on how to minimise any undue residual aid to the banks in line with EU rules

The actual measures will be announced by the Member States.

Recommended Actions

Health issues are a national competence. The associations and manufacturers are recommended to keep in contact with their national authorities. The members are recommended to closely follow the measures put in place at national level, so that, if needed, they can make use of them. The information on the various measures will appear on the websites of the relevant ministries.

In many countries, the national associations may also be able to provide guidance to the manufacturers towards measures that can help them to cope with the consequences of the coronavirus outbreak.

Related documents and links

All related documents and articles can be found in the respective sections in the right sidebar.