EU extends leniency towards COVID-19 support deep into 2021

FILE PHOTO: European Union flags flutter outside the European Commission headquarters in Brussels, Belgium August 21, 2020. REUTERS/Yves Herman

BRUSSELS (Reuters) - The European Commission said on Tuesday it was extending deep into 2021 its more flexible approach towards state aid and recapitalisation to support companies struggling due to coronavirus restrictions.

As COVID-19 cases spike across Europe, the Commission, which coordinates competition policy in the 27-country European Union, said its “Temporary Framework” allowing states to support businesses would be extended by six months until June 30, 2021.

The period for recapitalisation measures, currently allowed until June, would be prolonged by six months until September 30, 2021.

The Commission adopted its flexible approach to state aid on March 19, as the coronavirus first swept through the continent, plunging it into a deep recession.

The approach is designed to allow more than normally permitted under state aid rules while not overly distorting competition.

Five types of aid have been allowed - direct grants of up to 800,000 euros ($943,200), guarantees for loans, subsidised public loans, safeguards for banks and short-term export credit insurance.

The Commission said on Tuesday it has also allowed EU members to support companies facing a decline in turnover of at least 30% relative to the same period of 2019. Countries would be allowed to contribute to fixed cost of up to 3 million euros.

The EU executive also said it was adapting the conditions for recapitalisation measures, notably for state’s exit from recapitalisations where the state was already a shareholders. The state would be allowed to keep its previous holding, exiting the recapitalisation through an independent valuation.

Finally, the Commission will allow broader export credit coverage until the end of June.

Reporting by Philip Blenkinsop, editing by Marine Strauss