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Covid-19: Commission approves €2bn Greek Guarantee Measure to support companies

Featured Covid-19: Commission approves €2bn Greek Guarantee Measure to support companies

The European Commission on Friday approved a 2-billion-euro Greek aid scheme to support the country’s economy economy in the context of the cornavirus outbreak. The scheme was approved under the State aid Temporary Framework adopted by the Commission on March 19, as amended on April 3.

Greece notified to the Commission a support measure under the temporary framework in the form of guarantees on loans. The measure will be implemented through the issuance of guarantees by the Hellenic Development Bank (HDB) to financial intermediaries. The measure will partially guarantee eligible working capital loans originated by financial intermediaries.

The scheme is open to all Greek undertakings with the exception of financial intermediaries, such as banks, undertakings active in aquaculture, in agriculture and in sectors non-eligible by the European Regional Development Fund. It enables the granting of guarantees on loans to help businesses cover immediate working capital needs.

The Commission found that the Greek measure is in line with the conditions set out in the temporary framework. In particular, it covers guarantees on operating loans with a limited maturity and size. It also limits the risk taken by the State to a maximum of 80 percent. This risk is curbed further by a restriction limiting the State’s exposure to 40 percent of the volume of loans issued by a financial intermediary. This ensures that support is swiftly available at favourable conditions. To achieve this goal, the measure also involves minimum remuneration and safeguards to ensure that the aid is channelled effectively by the banks to the beneficiaries in need.

“This Greek scheme of 2 billion euros we approved today enables the granting of guarantees on working capital loans to help Greek businesses cover immediate working capital needs and continue their activities in these difficult times,” Executive Vice-President Margrethe Vestager, in charge of competition policy, said.

It is reminded that 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 April 3, provides for types of aid, which can be granted by Member States, including:

– direct grants, equity injections, selective tax advantages and advance payments of up to 800,000 euros to a company to address its urgent liquidity needs;
– state guarantees for loans taken by companies to ensure banks keep providing loans to the customers who need them;
– subsidised public loans to companies with favourable interest rates;
– safeguards for banks that channel State aid to the real economy;
– public short-term export credit insurance for all countries;
– 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;
– 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.

According to the temporary framework, Member States have to commit to avoid undue cumulation of support measures for the same companies to limit support to meet their actual needs.

Moreover, 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.