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EU leaders agree not ready to sign off a recovery plan

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EU leaders agreed today (19 June) that urgent action was needed to haul their coronavirus-hit economies from the deepest recession since World War Two, but made no progress on a massive stimulus plan that has divided them bitterly for weeks, write Francesco Guarascio  and Philip Blenkinsop.

The 27 avoided a bruising bust-up during a summit by video-conference of around four hours, and agreed to meet in person in mid-July to haggle and get across the line a long-term budget and economic rescue package worth €1.85 trillion.

“Leaders unanimously agreed that the severity of this crisis justifies an ambitious common response,” European Commission President Ursula von der Leyen.

Earlier, European Central Bank chief Christine Lagarde warned the leaders that the European Union’s economy was in a “dramatic fall” due to the coronavirus crisis and that the full impact on unemployment rates was yet to come.

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Under discussion is the EU’s 2021-27 budget of about €1.1trn, and a proposal by the Commission, the bloc’s executive, to borrow €750 billion from the market for a new recovery fund that would help revive economies hardest hit by coronavirus, notably Italy and Spain.

With more than 100,000 deaths from COVID-19, the EU is keen to demonstrate solidarity after months of bickering that has dented public confidence and put the bloc’s global standing at risk after its buffeting from Brexit.

A 'not particularly useful' summit

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Spanish Prime Minister Pedro Sanchez voiced impatience with a negotiation process that officials say could drag into August, calling for an early agreement.

“The more time we waste, the deeper will be the recession,” he said on Twitter.

But Swedish Prime Minister Stefan Lofven said member states remained “fairly far from each other” and while everyone wanted to do a deal over the summer he was not sure it was possible.

Fiscally conservative northern countries of the EU and a high-debt “Club Med” group of southerners are divided over the size and terms of the recovery fund, which the Commission has suggested be split into two-thirds grants and one-third loans.

The Netherlands, Denmark, Sweden and Austria - the 'Frugal Four' - say the fund is too large and should be used only as loans, since grants would have to be repaid by all EU taxpayers.

They want the funds to be clearly linked to pandemic recovery and say recipients must commit to economic reform.

Austrian Chancellor Sebastian Kurz called for a clear time limit on the recovery fund so it does not become an “an entry into a permanent debt union”.

Eastern EU countries say too much money will go to the south and want spending to focus on agriculture and closing development gaps with the richer west. The latter group, in turn, are determined to keep their rebates on contributions to the bloc’s joint coffers, which others want to phase out.

One senior EU diplomat said while there was little to show for the summit, at least it was cordial.

“It was not particularly useful,” the diplomat said. “On the other hand, it was not very controversial either, and the tone of the debate was OK.”

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Commission approves €1.8 million Latvian scheme to support cattle farmers affected by the coronavirus outbreak

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The European Commission has approved a €1.8 million Latvian scheme to support farmers active in the cattle-breeding sector affected by the coronavirus outbreak. The scheme was approved under the State Aid Temporary Framework. Under the scheme, the aid will take the form of direct grants. The measure aims at mitigating the liquidity shortages that the beneficiaries are facing and at addressing part of the losses they incurred due to the coronavirus outbreak and the restrictive measures that the Latvian government had to implement to limit the spread of the virus. The Commission found that the scheme is in line with the conditions of the Temporary Framework.

In particular, the aid (i) will not exceed €225,000 per beneficiary; and (ii) will be granted no later than 31 December 2021. The Commission concluded that the measure 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 scheme under EU state aid rules. More information on the Temporary Framework and other actions taken by the Commission to address the economic impact of the coronavirus pandemic can be found here. The non-confidential version of the decision will be made available under the case number SA.64541 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved.

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Commission approves €500,000 Portuguese scheme to further support the passenger transport sector in Azores in the context of the coronavirus outbreak

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The European Commission has approved a €500,000 Portuguese scheme to further support the passenger transport sector in the Region of the Azores in the context of the coronavirus outbreak. The measure was approved under the State Aid Temporary Framework. It follows another Portuguese scheme to support the passenger transport sector in Azores that the Commission approved on 4 June 2021 (SA.63010). Under the new scheme, the aid will take the form of direct grants. The measure will be open to collective passenger transport companies of all sizes active in the Azores. The purpose of the measure is to mitigate the sudden liquidity shortages that these companies are facing and to address losses incurred over 2021 due to the coronavirus outbreak and the restrictive measures that the government had to implement to limit the spread of the virus.

The Commission found that the Portuguese scheme is in line with the conditions set out in the Temporary Framework. In particular, the aid (i) will not exceed €1.8 million per company; and (ii) will be granted no later than 31 December 2021. The Commission concluded that the measure 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 of the Temporary Framework. On this basis, the Commission approved the measure under EU state aid rules. More information on the Temporary Framework and other actions taken by the Commission to address the economic impact of the coronavirus pandemic can be found here. The non-confidential version of the decision will be made available under the case number SA.64599 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved.

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Commission authorizes French aid scheme of €3 billion to support, through loans and equity investments, companies affected by the coronavirus pandemic

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The European Commission has cleared, under EU state aid rules, France's plans to set up a € 3 billion fund that will invest through debt instruments and equity and hybrid instruments in companies affected by the pandemic. The measure was authorized under the Temporary State Aid Framework. The scheme will be implemented through a fund, titled 'Transition Fund for Businesses Affected by the COVID-19 Pandemic', with a budget of € 3bn.

Under this scheme, support will take the form of (i) subordinated or participating loans; and (ii) recapitalization measures, in particular hybrid capital instruments and non-voting preferred shares. The measure is open to companies established in France and present in all sectors (except the financial sector), which were viable before the coronavirus pandemic and which have demonstrated the long-term viability of their economic model. Between 50 and 100 companies are expected to benefit from this scheme. The Commission considered that the measures complied with the conditions set out in the temporary framework.

The Commission concluded that the measure was necessary, appropriate and proportionate to remedy a serious disturbance in the economy of France, in accordance with Article 107 (3) (b) TFEU and the conditions set out in the temporary supervision. On this basis, the Commission authorized these schemes under EU state aid rules.

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Executive Vice President Margrethe Vestager (pictured), competition policy, said: “This €3bn recapitalization scheme will allow France to support companies affected by the coronavirus pandemic by facilitating their access funding in these difficult times. We continue to work closely with member states to find practical solutions to mitigate the economic impact of the coronavirus pandemic while respecting EU regulations.”

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