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State aid: EU Commission approves €7 billion French “umbrella” scheme to support the economy in the coronavirus outbreak

The European Commission has approved a €7 billion French “umbrella” scheme to support small and medium-sized enterprises (SMEs) and large corporates in France affected by the coronavirus outbreak.The scheme, called “Regime Cadre Temporaire”, 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: “The €7 billion French scheme approved will support French companies of all sizes through a wide range of support measures, including direct grants, repayable advances, public guarantees on loans and loans at favourable terms.

The objective of the measure is to help businesses cover their immediate working capital and investment needs in these difficult times due to the coronavirus outbreak. We continue to work with all Member States to ensure that national support measures can be put in place in a timely, coordinated and effective way, in line with EU rules.”

The French support measures

France notified to the Commission under the amended Temporary Framework an “umbrella” scheme to support non-financial companies affected by the coronavirus outbreak.

The measure is a French-wide National Temporary Framework for State aid, with an estimated budget of €7 billion, and allows for the provision of aid in the form of:

a) Limited amount of aid in the form of direct grants, equity injections, repayable advances and subsidised loans, up to a maximum nominal amount of €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;

b) State guarantees for loans, subject to safeguards for banks to channel State aid to the real economy; and/or

c) Public loans to companies with favourable interest rates;

The measure allows aid to be granted by French authorities at all levels, including central government, regional and local authorities and other bodies administering schemes involving state resources channelled through their own budgets.

The measure is targeted at SMEs and large corporates and applies to the whole territory of France. Aid is granted under the measure either directly or, if it concerns guarantees on loans, through credit institutions and other financial institutions as financial intermediaries.

The Commission found that the French measure is in line with the conditions set out in the Temporary Framework. France will ensure that the rules for cumulation of aid are respected across all measures under the Temporary Framework and granting authorities.

The State will be appropriately remunerated for the risks taken. Where the aid is channelled through commercial banks, the latter will pass the advantage on to the companies that need support. Furthermore, aid may be granted under the measure only to undertakings that were not in difficulty on 31 December 2019. Finally, aid can be granted only until the end of this year.

The Commission concluded that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, 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.

Arianna PODESTA