EU Commission to allow state aid for capital injections in private companies

epa07522825 A view of a European flag in front of the European Commission in Brussels, Belgium, 23 April 2019. The European Union elections will take place from 23 - 26 May 2019. EPA-EFE/STEPHANIE LECOCQ

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The European Commission is proposing an extension in the State Aid temporary framework, adopted last month, in its bid to further support European economies in facing the challenges brought by the current pandemic. The new measures will allow Member States to provide capitalisation to companies facing severe difficulties in the wake of restrictions associated with efforts aimed at stopping the spread of the virus.

The Temporary Framework increased Member States’ flexibility in providing public support to research, testing and production of products relevant to fight the coronavirus outbreak, to protect jobs and to further support the economy.

In total, the Commission has adopted 43 decisions approving 53 national measures in relation to the coronavirus outbreak. Since its adoption on 19 March 2020, the Commission has taken 39 State aid decisions based on the Temporary Framework to approve 49 national measures that provide much needed liquidity to European businesses in these difficult times.

The Commission is now proposing to extend further the scope of the Temporary Framework by enabling Member States to provide recapitalisations to companies in need. Since such public interventions may have a significant impact on competition in the Single Market, they should remain measures of last-resort. They will also be subject to clear conditions as regards the State’s entry, remuneration and exit from the companies concerned, strict governance provisions and appropriate measures to limit potential distortions of competition.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Our shared priority faced with the coronavirus crisis is protecting the health of all European citizens. At the same time, the emergency measures are putting a strain on many companies that face a reduction in equity, with negative consequences on their ability to finance their activities. Following the amendment of last week, we will further extend the State aid Temporary Framework to enable Member States to recapitalise companies when necessary and appropriate. We will make sure that taxpayers are sufficiently remunerated for their investment, and companies that receive capital support are subject to controls and governance provisions that limit possible distortions to competition in the Single Market. We continue working with Member States to make sure that the European economy can weather this storm, and bounce back even stronger.”

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