The containment measures to decelerate the spread of the coronavirus pandemic have brought large parts of the economy to a standstill. Countries around the world and in the European Union are adopting economic support measures designed to cushion the adverse effects on people and economic activity as much as possible. They relate to both monetary and fiscal policies.

On 13 March 2020, the Commission adopted a communication listing the various options available with a view to:

• ensuring solidarity in the single market (relating to the supply of medical equipment, transport and tourism),
• mobilising the EU budget and the European Investment Bank group (relating to liquidity measures to support firms, sectors and regions, alleviating the impact on employment,
• launching the coronavirus response investment initiative (CRII),
• making use of the full flexibility of the European fiscal framework, and
• preparing a temporary framework for State aid flexibility to allow adequate national support of companies and customers.

State aid describe measures to undertakings that confer a competitive selective advantage that may affect trade between Member States. As a result, measures not applying to businesses as well as measures of general application to all businesses do not constitute State aid. From a competition law point of view, measures that constitute State aid are in principle illegal, unless issued under an exemption or authorised.

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; this category of aid is compatible with the Treaty. State aid can also be used to remedy serious disturbances to the economy; in this case they need to be assessed when they do not fall under a compatible category, existing exemption, such as the de minimis regulation (below a certain threshold) or the general block exemption regulation, subject to notification and European Commission approval

On 20 March 2020, the commission adopted by way of a communication a temporary framework for State aid measures to support the economy in the current COVID-19 outbreak, The temporary framework set out the State aid measures that the Commission will consider compatible under Article 107(3) TFEU in light of the pandemic, allowing Member States full flexibility in supporting their coronavirus-stricken economies.

The initial temporary framework allows five types of temporary measure:

• aid in the form of direct grants, repayable advances or tax benefits (with specific conditions for agricultural, fisheries and aquaculture sectors),
• aid in the form of guarantees on loans,
• aid in the form of subsidised interest rates for loans,
• aid in the form of guarantees and loans channelled through credit institutions or other financial institutions, and
• short-term export credit insurance.

On 3 April 2020, an amendment to the temporary framework was adopted by the Commission by way of a communication. This communication identifies additional measures considered compatible and clarifies some of the elements and conditions set for the five categories introduced in the initial framework. It adds the following types of measures:

• aid for Covid-19-related research and development (projects carrying out research into Covid-19 and other relevant antiviral research (including projects having received a Covid-19-specific seal of excellence quality label under the Horizon 2020 SME instrument),
• investment aid for testing and upscaling infrastructure,
• investment aid for the production of Covid-19 relevant products, aid in form of deferrals of tax and/or of social security contributions (to reduce the liquidity constraints of undertakings, including self-employed individuals, and to preserve employment),
• aid in form of wage subsidies for employees to avoid lay-offs during the Covid-19

Furthermore, as stated in the temporary framework, the measures adopted need to be consistent with the green and digital twin transitions, in accordance with EU objectives.

Since 12 March 2020, Member States have notified schemes focussing chiefly on support for the economy and companies, general support and measures specific to companies depending on their size and sector of activity (cancellation of events, travel and airlines, fisheries and aquaculture). In addition, a number of schemes relate to the production of medical equipment and coronavirus-related research and development. Most recently, employment aid schemes have been designed on the basis of the possibilities set out in the first amendment to the temporary framework.

The temporary framework might be further amended to cover further categories of schemes.

• European Commission, State aid rules and coronavirus, webpage
• European Commission, Communication on coordinated economic response to the COVID-19 Outbreak, 13 March 2020
• European Commission, Communication on a Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, 20 March 2020
• European Commission, Communication Amendment to the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, 3 April 2020

Further reading:

• European Parliament, EPRS, State aid and the pandemic - How State aid can back coronavirus economic support measures, Briefing, April 2020

Author: Miroslava Karaboytcheva, Members' Research Service, legislative-train@europarl.europa.eu