Commission approves German fund to enable up to €500 billion of liquidity and capital support to enterprises affected by #Coronavirus outbreak

The European Commission has approved German plans to set up a fund ('Wirtschaftsstabilisierungsfonds') with a budget of up to €500 billion for providing guarantees and investing through debt and equity instruments in enterprises affected by the coronavirus outbreak. The scheme was approved under the state aid Temporary Framework. Under the scheme, the support will take the form of (I) guarantees (that are expected to mobilize €400bn of the total amount), as well as (II) subsidized debt instruments in form of subordinated loans, and (III) recapitalization instruments (in total up to €100bn), in particular equity instruments (acquisition of newly issued ordinary and preferred shares or other forms of shareholding) and hybrid capital instruments (namely convertible bonds and silent participations).

The Commission found that the scheme notified by Germany is in line with the conditions set out in the Temporary Framework. The Commission concluded that the German measure will contribute to managing the economic impact of the coronavirus outbreak in Germany. Furthermore, it is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a member state, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework.

On this basis, the Commission approved the measures under EU state aid rules. In addition to the €500bn approved by the Commission, the fund can raise up to €100bn to refinance state aid measures that were already notified to and approved by the Commission, bringing the total budget of the Wirtschaftsstabilisierungsfonds to €600bn.

Executive Vice President Margrethe Vestager, in charge of competition policy, said: “In these difficult times, we continue to work in close cooperation with member states to find workable solutions to facilitate the access to finance of companies affected by the coronavirus outbreak, in line with EU rules. The German fund aims to unlock €500bn of liquidity and capital support. The scheme ensures that the state is sufficiently remunerated for the risk taxpayers assume, and, as regards recapitalization measures, that there are incentives for the state to exit as soon as possible, and that the support comes with adequate conditions, including a ban on dividends, bonus payments as well as further measures to limit distortions of competition.”

The full press release is available here.

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