The first three of the schemes, notified by France, include state guarantees on commercial loans and credit lines for enterprises with up to 5,000 employees as well as state guarantees to banks on portfolios of new loans to all types of companies. In total, the schemes are expected to facilitate more than €300 billion of liquidity support to French businesses. This was quickly followed by the approval of loan and guarantee schemes in Denmark and Germany, and a €50 million scheme to support the production of ventilators and personal protection equipment in Italy.
Totis Kotsonis, a specialist in state aid at Pinsent Masons, the law firm behind Out-Law, said: "Unlike aid which is de minimis aid or comes within the scope of the general block exemption, aid under the framework still requires prior notification to the Commission for approval before implementation. However, the rapid approval of the first seven schemes shows that aid which meets the new framework's requirements can and will be approved very rapidly by the Commission."
The latest developments follow the approval on 12 March of a €12m scheme to compensate event organisers in Denmark. Brendan Ryan, a senior associate at Pinsent Masons, said: "The Danish scheme was approved because it was considered to be a direct response to an 'exceptional occurrence'. The temporary framework, by contrast, covers schemes to 'remedy a serious disturbance' in the economy."
"The distinction is an important one: it may be some time before the extent of the damage to real economy becomes apparent and this will make it more difficult to establish a causal link between the 'exceptional occurrence' – the pandemic – and the economic effects a particular scheme is designed to remedy. The framework provides greater certainty and indeed time for member states to develop targeted schemes for sectors suffering from the economic aftershocks of the crisis."
In addition to aid measures for 'exceptional occurrences' and to remedy serious economic disturbances, member states are also free to introduce supports such as wage subsidies or compensating consumers directly for cancelled services which are not reimbursed – as these measures apply generally across the economy, they are considered to fall outside the state aid regime.
However, further intervention might still be needed, according to Totis Kotsonis: "The Commission's efforts over the past fortnight are certainly welcome, but further action may be needed in due course, in particular to assist the ailing airline industry. The temporary framework will allow for liquidity to be quickly injected into the economy, but this might not be enough to address the concerns of a number of airlines over solvency issues."
"In this regard, the temporary framework does clarify that the principle of 'one time, last time' aid to rescue and restructure failing businesses does not prevent those businesses from receiving further aid which is notified to the Commission in response to 'exceptional occurrences'. This clarification will be welcomed by undertakings in the aviation sector which may already have received rescue and restructuring aid but now find themselves struggling again because of this crisis," Kotsonis said.
“At the same time, it is clear that within this framework, neither the Commission nor competitors of aid recipients will accept member states providing support to businesses, including struggling national airlines, which goes beyond what is necessary to compensate for damage caused directly as a result of the pandemic," he said.