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State aid: EU Commission approves €900 million Hungarian schemes to support companies affected by coronavirus outbreak

The European Commission has approved three Hungarian aid measures, with a total budget of around € 900 million, to support the Hungarian economy in the context of the coronavirus outbreak. The schemes were 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 three measures, with an overall budget of around €900 million, will enable Hungary to support up to 5,000 companies of all sizes in addressing their immediate liquidity needs, alleviating their financial burden and helping them maintain jobs during and after the coronavirus outbreak. We work closely with Member States to ensure that national support measures can be put in place in a coordinated and effective way, in line with EU rules.”

The Hungarian support measures

Hungary notified to the Commission under the Temporary Framework three support measures, with a total budget of around € 900 million, to support companies affected by the coronavirus outbreak.

Under the three schemes, the public support will take the form of (i) direct grants, (ii) guarantees on loans, and (iii) subsidised interest rates for loans, respectively. The measures, which will be open to small and medium-sized enterprises (SMEs) and large companies facing economic difficulties and liquidity shortages due to the coronavirus outbreak. The schemes are expected to benefit up to 5,000 businesses.

The schemes aim at providing businesses which are particularly affected by the coronavirus outbreak with sufficient liquidity to cover their immediate working capital and investment needs, thus enabling them to continue their activities, make investments and maintain employment during and after the outbreak.

The Commission found that the Hungarian measures are in line with the conditions set out in the Temporary Framework. In particular:

With respect to direct grants, (i) the support will not exceed the 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, and (ii) the support will not be granted to undertakings that were already in difficulty on 31 December 2019.


With respect to guarantees on loans, the support will be implemented through three sub-measures targeted respectively at SMEs, smaller mid-caps and large companies with guarantee coverage between 80% to 90% and accordingly adjusted guarantee premiums. The guaranteed loan amounts for SMEs will be limited to €3 million, while they will be limited to € 15 million for small mid-caps.


With respect to subsidised interest rates for loans, the credit risk margins are in line with the ones set in the Temporary Framework and will be summed with the applicable base rate for Hungary.

The Commission concluded that the Hungarian measures are 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.

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