EU allows state aid for businesses affected by war

The war in Ukraine and the associated sanctions against Russia have hit the European economies hard. The European Commission has therefore adopted a Temporary Crisis Framework allowing member states to provide state aid to affected businesses to mitigate any negative economic impact.

The Temporary Crisis Framework of 23 March 2022 complements the existing list of instruments under which EU member states can provide financial support to businesses affected by the economic impact of the war in Ukraine. Using three types of support, the crisis framework allows, inter alia, to ensure sufficient liquidity and to compensate for the additional costs incurred due to exceptionally high gas and electricity prices.

Limited-amount support schemes

The framework introduces support schemes allowing affected businesses to receive up to EUR 400,000. The support does not have to be related to energy price increases and can be provided in any form, including direct grants.

Liquidity support through state guarantees and subsidised loans

To ensure that banks will continue to lend to all businesses affected by the current crisis, entities will also be able to obtain subsidised state guarantees and benefit from loans at subsidised interest rates. Banks should thus not have to worry about the return on financial resources when lending to businesses affected by the crisis. However, aid is in both cases limited to a maximum loan amount.

Aid to compensate for high energy prices

Member states will also be able to partially compensate affected energy-intensive businesses for higher costs associated with the increases in gas and electricity prices. Support can be provided in any form, including direct grants. Aid granted to an individual enterprise may not simultaneously exceed 30% of eligible costs and EUR 2 million. In the case of operating losses, aid may be increased to up to EUR 25 million for energy-intensive users and to EUR 50 million for enterprises operating in special sectors (e.g., metal production).

In effect until 31 December 2022, the crisis framework will be available to member states in addition to other state aid instruments (e.g., support to compensate for the damage caused by extraordinary events). Should the current problems continue, the framework’s effectiveness may be extended, as in the case of the temporary framework adopted in connection with the COVID-19 pandemic.

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