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    EC Proposes to Prolong and Adjust State Aid Temporary Framework

    October 02, 2020

    EC is consulting member states on a draft proposal to prolong the State aid Temporary Framework until June 30, 2021 and adjust its scope. The temporary framework was adopted on March 19, 2020 to support economy in the context of the COVID-19 outbreak. The temporary framework allows member states to guarantee the availability of sufficient liquidity for businesses of all types and preserve the continuity of economic activity during and after the COVID-19 outbreak.

    EC has issued a consultation on the draft proposal to: 

    • Prolong, at the current limits, existing provisions of the temporary framework (including for liquidity support) for an additional six months until June 30, 2021
    • Extend the scope of the temporary framework by enabling member states to contribute to the fixed costs of companies (costs that are not covered by the revenues)
    • Adapt the conditions for recapitalization measures under the temporary framework, in particular for the State's exit from enterprises where the State was an existing shareholder prior to the recapitalization 

    The proposed changes would allow the State to exit from the equity of such enterprises through an independent valuation, while maintaining the safeguards to preserve effective competition in the Single Market. The temporary framework was first amended in April 2020. In May 2020, EC adopted a second amendment extending the scope of the temporary framework to recapitalization and subordinated debt measures. In June 2020, EC adopted a third amendment extending the scope of the temporary framework to further support micro, small, and startup companies and incentivize private investments. The temporary framework was initially set to expire on December 31, 2020, except for recapitalization measures that may be granted until June 30, 2021. 

     

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    Keywords: Europe, EU, Banking, COVID-19, Temporary Framework, State Aid Rules, Credit Risk, EC

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