Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The Luxembourg scheme that we approved today enables the granting of guarantees on loans at favourable terms to help business cover immediate working capital and investment needs and continue their activities in these difficult times. We continue working closely with Member States to ensure that national support measures can be put in place in a timely, coordinated and effective way, in line with EU rules.”
Following the approval of the Luxembourg measure adopted on 24 March 2020, Luxembourg notified to the Commission an additional support measure under the Temporary Framework in the form of guarantees on loans.
The Commission found that the Luxembourg measure is in line with the conditions set out in the Temporary Framework. In particular, (i) the underlying loan amount per company is linked to cover its liquidity needs for the foreseeable future, (ii) the guarantees will only be provided until the end of this year, (iii) the guarantees are limited to a maximum six-year duration, and (iv) companies pay guarantee premiums as set out in the Temporary Framework.
On this basis, the Commission approved the measure under EU State aid rules.
The Commission has adopted a Temporary Framework to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the Coronavirus outbreak. The Temporary Framework provides for five types of aid, which can be granted by Member States:
(ii) State guarantees for loans taken by companies from banks: Member States will be able to provide State guarantees to ensure banks keep providing loans to the customers who need them. These state guarantees can cover loans to help businesses cover immediate working capital and investment needs.
(iv) Safeguards for banks that channel State aid to the real economy: Some Member States plan to build on banks' existing lending capacities, and use them as a channel for support to businesses – in particular to small and medium-sized companies. The Framework makes clear that such aid is considered as direct aid to the banks' customers, not to the banks themselves, and gives guidance on how to ensure minimal distortion of competition between banks.
The Temporary Framework will be in place until the end of December 2020. With a view to ensuring legal certainty, the Commission will assess before that date if it needs to be extended.
The Temporary Framework complements the many other possibilities already available to Member States to mitigate the socio-economic impact of the Coronavirus outbreak, in line with EU State aid rules. On 13 March 2020, the Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak setting out these possibilities. For example, Member States can make generally applicable changes in favour of businesses (e.g. deferring taxes, or subsidising shorttime work across all sectors), which fall outside State Aid rules. They can also grant compensation to companies for damage suffered due to and directly caused by the Coronavirus outbreak.