Written by Cécile Remeur,
The coronavirus pandemic and its financial and economic consequences have caused a major economic downturn, and the European Union (EU) has moved rapidly to respond with monetary and fiscal policy measures. The fiscal policy instruments deployed include the adaptation of State aid rules to the exceptional circumstances to allow Member States to support their economies by means of direct or indirect intervention.
From a competition law point of view, measures that constitute State aid are in principle illegal, unless issued under an exemption, such as the De minimis Regulation or the General Block Exemption Regulation, subject to notification and European Commission approval. The State aid rules do, however, already allow for aid to compensate for damage caused by natural disasters and exceptional events, such as a pandemic.
State aid can also be used to remedy serious disturbances to the economy. The temporary framework adopted by the Commission in March 2020 sets out temporary State aid measures that the Commission will consider compatible with the State aid rules, allowing Member States full flexibility in supporting their coronavirus-stricken economies. The temporary framework is in place to address Member States’ various needs more effectively.
The framework initially focused on measures to ensure liquidity. In early April, it was broadened to include measures to support the economy and coronavirus-related medical investment, research and production, as well as measures to ease the social and tax liabilities of companies and the self-employed and measures to subsidise workers’ wages.
Read the complete briefing on ‘State aid and the pandemic: How State aid can back coronavirus economic support measures‘ in the Think Tank pages of the European Parliament.