March 17, 2020 / 11:52 AM / 5 months ago

EU to ease state aid rules to help virus-hit companies

BRUSSELS (Reuters) - Companies hit by the coronavirus will be allowed to receive state grants up to 500,000 euros ($551,200) or subsidized state guarantees on bank loans as part of new temporary rules, EU antitrust chief Margrethe Vestager said on Tuesday.

Vestager said the move would provide liquidity to keep companies operating and ensure consistency across the 27-country bloc, where some governments have taken unilateral measures to protect their citizens and companies.

“We have to be able to rely on the European single market to help our economy weather the outbreak and bounce back strongly,” Vestager said in a statement.

Under the proposed temporary framework, which the Commission aims to have in place within the next few days, governments will also be allowed to facilitate public and private loans with subsidized interest rates.

The temporary rules will also make it easier for banks to help their customers, especially small and medium-sized enterprises.

Similar temporary rules were introduced during the 2008 banking crisis, when the European Commission allowed governments to pump billions into financial institutions to keep them afloat.

The banks, however, were ordered to restructure, sell assets, keep a lid on pay rises for top management and banned from acquisitions in return for their bailouts.

Vestager said that existing rules already allow EU governments to help the airline industry, among the hardest hit by the outbreak.

“Compensation can be granted to airlines under Article 107(2)(b) TFEU for damages suffered due to the COVID-19 outbreak, even if they have received rescue aid in the last ten years. In other words, the ‘one time last time’ principle does not apply,” she said.

Vestager’s decision to ease the bloc’s strict competition rules came amid calls from EU governments for greater latitude in providing help to ailing companies.

Poland cited a liquidity problem and called for support for all companies, in particular for the transport sector, EU diplomats said after a meeting last week.

Commission officials at the meeting also said they would soon provide guidance on compensation for companies forced to halt projects and citing force majeure.

Additional reporting by Francesco Guarascio; Editing by David Goodman

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