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EU Commission approves Italian guarantee scheme to support self-employed workers, SMEs and mid-caps affected by coronavirus outbreak

The European Commission has approved an Italian aid scheme to support self-employed workers and companies with up to 499 employees affected by coronavirus outbreak. The scheme was approved under the State aid Temporary Framework adopted by the Commission on 19 March 2020, as amended on 3 April 2020.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This scheme will enable Italy to support self-employed workers, SMEs and mid-caps affected by the coronavirus outbreak through the provision of State guarantees.

Together with the other Italian scheme to support the Italian economy in the context of the coronavirus outbreak, which is tailored to larger companies, this scheme will help smaller businesses to cover their immediate investment and working capital needs, thus ensuring that they can continue their activities during and after the outbreak. Putting in place the necessary national support measures in a timely, coordinated and effective way, in line with EU rules, is of paramount importance in these challenging times.”

The Italian support measure

Italy notified to the Commission under the Temporary Framework a scheme to support companies affected by the coronavirus outbreak.

Under the scheme, support will be granted by the State-owned “Guarantee Fund for SMEs”, through financial institutions, in the form of:

 State guarantees on investment and working capital loans;


 Direct grants in the form of waiving of the applicable fee on the guarantees awarded.

The scheme will be open to self-employed workers and companies with up to 499 employees affected by the coronavirus outbreak. The aim of the scheme is to help businesses to cover their immediate working capital and investment needs, thus ensuring the continuation of their activities.

The Commission found that the measure is in line with the conditions set out in the Temporary Framework. In particular:

 With respect to State guarantees, under the scheme:

o Guarantees on loans covering 100% of the risk can be granted up to a nominal value of €800,000 per company as foreseen by the Temporary Framework (for companies in the fishery and agricultural sectors, the applicable thresholds are €120 000 and €100 000 respectively);

o In all other cases, (i) guarantees cover up to 90% of risk on loans; (ii) the underlying loan amount per company is limited to what is needed to cover its liquidity needs for the near future, (iii) the guarantees will only be provided until December 2020, (iv) the guarantees are limited to a maximum of six years, and (iv) guarantee fee premiums are in line with the levels foreseen by the Temporary Framework.

 With respect to the direct grants in the form of waiving of the applicable fee on the guarantees awarded, the support will not exceed €800 000 per company as foreseen by the Temporary Framework (for companies in the fishery and agricultural sectors, the applicable thresholds are €120 000 and €100 000 respectively).

The Commission concluded that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the Italian economy, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework.

On this basis, the Commission approved the measures under EU State aid rules.

Background

The Commission has adopted a Temporary Framework to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework, as amended on 3 April 2020, provides for the following types of aid, which can be granted by Member States:

(i) Direct grants, equity injections, selective tax advantages and advance payments of up to €100,000 to a company active in the primary agricultural sector, €120,000 to a company active in the fishery and aquaculture sector and €800,000 to a company active in all other sectors to address its urgent liquidity needs. Member States can also give, up to the nominal value of €800,000 per company zero-interest loans or guarantees on loans covering 100% of the risk, except in the primary agriculture sector and in the fishery and aquaculture sector, where the limits of €100,000 and €120,000 per company respectively, apply.

(ii) State guarantees for loans taken by companies to ensure banks keep providing loans to the customers who need them. These state guarantees can cover up to 90% of risk on loans to help businesses cover immediate working capital and investment needs.

(iii) Subsidised public loans to companies with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.

(iv) Safeguards for banks that channel State aid to the real economy that such aid is considered as direct aid to the banks’ customers, not to the banks themselves, and gives guidance on how to ensure minimal distortion of competition between banks.

(v) Public short-term export credit insurance for all countries, without the need for the Member State in question to demonstrate that the respective country is temporarily “non-marketable”.

(vi) Support for coronavirus related research and development (R&D) to address the current health crisis in the form of direct grants, repayable advances or tax advantages. A bonus may be granted for cross-border cooperation projects between Member States.

(vii) Support for the construction and upscaling of testing facilities to develop and test products (including vaccines, ventilators and protective clothing) useful to tackle the coronavirus outbreak, up to first industrial deployment. This can take the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.

(viii) Support for the production of products relevant to tackle the coronavirus outbreak in the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.

(ix) Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions for those sectors, regions or for types of companies that are hit the hardest by the outbreak.

(x) Targeted support in the form of wage subsidies for employees for those companies in sectors or regions that have suffered most from the coronavirus outbreak, and would otherwise have had to lay off personnel.

The Temporary Framework enables Member States to combine all support measures with each other, except for loans and guarantees for the same loan and exceeding the thresholds foreseen by the Temporary Framework. It also enables Member States to combine all support measures granted under the Temporary Framework with existing possibilities to grant de minimis to a company of up to €25,000 over three fiscal years for companies active in the primary agricultural sector, €30,000 over three fiscal years for companies active in the fishery and aquaculture sector and €200,000 over three fiscal years for companies active in all other sectors. At the same time, Member States have to commit to avoid undue cumulation of support measures for the same companies to limit support to meet their actual needs.

Furthermore, the Temporary Framework complements the many other possibilities already available to Member States to mitigate the socio-economic impact of the coronavirus outbreak, in line with EU State aid rules. On 13 March 2020, the Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak setting out these possibilities. For example, Member States can make generally applicable changes in favour of businesses (e.g. deferring taxes, or subsidising short-time work across all sectors), which fall outside State Aid rules. They can also grant compensation to companies for damage suffered due to and directly caused by the coronavirus outbreak.

The Temporary Framework will be in place until the end of December 2020. With a view to ensuring legal certainty, the Commission will assess before that date if it needs to be extended.

Arianna PODESTA,    Giulia ASTUTI