Dear Members,
Below we provide an overview of the financing and state aid measures proposed by the Commission to address the economic impact of the coronavirus crisis.
OPERATIONAL RESPONSE INITIATIVE
The Commission proposed the reallocation of €37 billion under cohesion policy and from the European Structural and Investment Funds and its full implementation in 2020 with exceptional and rapid procedures.
The initiative focuses on the following three areas:
- health expenditure related to covid-19, in any part of the Member States,
- support for public transport working capital,
- short-term employment schemes.
Under the proposal, around €8 billion of liquidity will be made available immediately to Member States for national contributions under cohesion policy interventions. This will be complemented by €29 billion from the EU budget, the European Structural and Investment Funds (no new amounts from Member States are foreseen).
The proposal makes all potential expenditure to combat the COVID-19 epidemic eligible from 1 February 2020, so that Member States can spend the funds as quickly as possible to combat the epidemic.
In addition, the Commission proposes to enable a seamless shift of funds across programmes. These measures should allow all Member States to refocus and direct support in the coming weeks where it is most needed, in particular:
- Providing support to the healthcare system, e.g. through financing health equipment and medicines, testing and treatment facilities, disease prevention, e-health, provision of protective equipment, medical devices, adaptation of the working environment in the healthcare sector and ensuring access for vulnerable groups.
- Providing liquidity to businesses to address short-term economic crises associated with the Covid-19 crisis, covering e.g. working capital in public transport to address losses due to the crisis, with particular attention to sectors that are particularly affected.
- To temporarily support national short-time work schemes that help to address the impact of the shock, combined with capacity-building and upskilling measures.
The Council and Parliament will have to agree on the proposal (via a fast-track procedure). ESPO will certainly convey the needs of European ports on this matter to the relevant MEPs.
STATE AID
The Communication describes the support measures that Member States can already take under the current State aid rules:
- Member States may decide to take measures applicable to all companies, such as wage subsidies and the suspension of payments of corporate and value added taxes or social contributions. These measures relieve financial pressure on companies in a direct and effective way. They do not fall within the scope of State aid control and can be implemented immediately by Member States, without the involvement of the Commission.
- State aid rules allow Member States, subject to Commission approval, to respond to acute liquidity needs and support companies facing bankruptcy due to the COVID-19 outbreak.
- Article 107(2)(b) TFEU allows Member States, with the approval of the Commission, to compensate companies for damage suffered in exceptional circumstances, such as those caused by the COVID-19 outbreak. This includes measures to compensate businesses in sectors that have been particularly affected (e.g. transport, tourism and hospitality).
– ITALY:
Currently, the impact of the COVID-19 outbreak in Italy is of a nature and scale that allows the use of Article 107(3)(b) TFEU. This allows the Commission to approve additional national support measures to address a serious disturbance in the economy of a Member State, which the Commission considers to exist in Italy.
In addition, the European Commission has transmitted to Member States for consultation a draft proposal for a temporary State aid framework to support the economy in the context of the COVID-19 epidemic, with the aim of establishing the framework within the coming days.
The proposal will allow four types of aid:
- direct grants and selective tax advantages (up to 500.000 euros to a business to address its urgent liquidity needs through a direct subsidy or tax advantage),
- state guarantees for loans taken by companies from banks (guarantees can concern both investment and working capital loans),
- subsidized public loans to businesses (both for investment and working capital),
- safeguards for banks that channel support to the real economy.
Companies that encountered difficulties after 31 December 2019 are eligible for support under this temporary framework.
You can access Commissioner Vestager's full statement here: https://ec.europa.eu/commission/presscorner/detail/en/statement_20_479
FLEXIBILITY OF THE EUROPEAN FISCAL FRAMEWORK
Targeted fiscal support measures are possible to address the immediate negative socio-economic consequences of the virus outbreak. This includes supporting businesses in specific sectors and sectors that are experiencing production or sales disruptions and are therefore affected by the liquidity squeeze, in particular public transport. Actions could include:
- Tax measures targeting businesses in the affected regions and sectors (e.g. deferral of payment of corporate taxes, social security contributions and VAT, progress of public payments and arrears, tax deductions, direct financial support).
- Guarantees to banks to help companies with working capital and export guarantees, possibly complemented by supervisory measures.
- The Commission considers that the flexibility to address “unusual events beyond our control” applies to the current situation, for which the Stability and Growth Pact provides that Member States are allowed to temporarily deviate from the required fiscal adjustments.
