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    EC Decides to Prolong and Adjust State Aid Temporary Framework

    October 13, 2020

    EC decided to prolong, and extend scope, of the State Aid Temporary Framework to support the economy in the context of the COVID-19 outbreak. All sections of the temporary framework are being prolonged for six months until June 30, 2021, except the section to enable recapitalization support, which is being prolonged for three months until September 30, 2021. EC published a communication to amend the State Aid Temporary Framework in the Official Journal of the European Union. Under the EU State Aid Rules, EC also approved two Swedish schemes to support companies affected by the COVID-19 outbreak.

    The following are the key amendments to the State Aid Temporary Framework:

    • Prolongation of the temporary framework—The temporary framework was initially set to expire on December 31, 2020, except for recapitalization measures that could be granted until June 30, 2021. The amendment prolongs the provisions of the temporary framework until June 30, 2021, except the recapitalization measures that are being prolonged until September 30, 2021. EC will review and examine the need to further prolong or adapt the temporary framework.
    • Support for uncovered fixed costs of companies—The amendment introduces a new measure to enable member states to support, during the eligible period, companies facing a decline of at least 30% in turnover (in the context of COVID-19 outbreak) compared to the same period of 2019. 
    • Exit of the State from previously state-owned companies—EC adapted the conditions for recapitalization measures under the temporary framework, in particular for a member state's exit from the recapitalization of enterprises where the sate was an existing shareholder prior to the recapitalization. The amendment allows the state to exit from the equity of such enterprises through an independent valuation, while restoring its previous shareholding and maintaining the safeguards to preserve effective competition in the Single Market.
    • Extension of the temporary removal of all countries from the list of “marketable risk" countries under the short-term export-credit insurance communication—Taking into account the continued general lack of sufficient private capacity to cover all economically justifiable risks for exports to countries from the list of marketable risk countries, the amendment provides for an extension until June 30, 2021 of the temporary removal of all countries from the list of “marketable risk" countries under the short-term export-credit insurance Communication.

     

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

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