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German states favour extending COVID-19 lockdown to boost Christmas prospects

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Many of Germany’s 16 federal states favour extending a partial shutdown meant to slow the spread of the COVID-19 pandemic and make family gatherings over Christmas possible, two state premiers said on Monday (23 November). Germany, which is governed by a conservative-Social Democratic coalition, imposed a month-long “lockdown-lite” from 2 November. Infection numbers have plateaued since but not declined, write Christian Goetz, Thomas Seythal and Kirsti Knolle.

“The November shutdown has brought something, the (infection) numbers are subdued but they remain high,” Manuela Schwesig, premier of the northern state of Mecklenburg-Vorpommern, told Deutschlandfunk (DLF) radio.

“For this reason, many states believe that the November shutdown must continue, especially in the risk areas,” the Social Democrat said. Saxony-Anhalt state premier Reiner Haseloff, a member of Chancellor Angela Merkel’s conservatives, told a news conference there was a general agreement that current restrictions should be extended for about three weeks. State premiers and Merkel are due to discuss the measures on Wednesday.

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They could extend them until 20 December, according to draft proposals from the Christian Democrats and the Social Democrats obtained by Reuters. Bars and restaurants are closed under the November lockdown but schools and shops remain open. Private gatherings are limited to a maximum of 10 people from two households. The number of confirmed coronavirus cases rose by 10,864 to 929,133 over the past 24 hours, 40 more than the corresponding rise from the previous Sunday last week, data from the Robert Koch Institute (RKI) for infectious diseases showed on Monday (23 NOvember).

The reported death toll rose by 90 to 14,112 in Germany, a country of 83 million with Europe’s biggest economy. Financial support for businesses could be extended into December, Economy Minister Peter Altmaier was quoted as saying on DLF. Preparations for COVID-19 vaccinations should be completed by mid-December to be able to immediately start inoculations should vaccines become available before the end of the year, Health Minister Jens Spahn told reporters. Such hopes have been boosted by Pfizer’s and BioNTech’s US application for emergency use authorization of their COVID-19 vaccine.

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Commission approves €31.9 billion Italian scheme to support companies affected by the coronavirus outbreak

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The European Commission has approved a €31.9 billion Italian scheme to support companies affected by the coronavirus outbreak. The scheme was approved under the State Aid Temporary Framework.

Executive Vice President Margrethe Vestager, in charge of competition policy, said: “Many companies in Italy have seen their revenues significantly decline because of the coronavirus outbreak and of the measures necessary to limit its spread. This €31.9bn scheme will enable Italy to support these companies by helping them meet their liquidity needs and cover the fixed costs that are not covered by their revenues. We continue working in close cooperation with member states to find workable solutions to mitigate the economic impact of the coronavirus outbreak, in line with EU rules.”

The Italian support measures

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Italy notified to the Commission under the Temporary Framework a €31.9bn aid scheme to support companies affected by the coronavirus and the restrictive measures that the Italian government had to implement to limit the spread of the virus.

The scheme consists of two measures: (i) limited amounts of aid; and (ii) support for uncovered fixed costs incurred during the period between March 2020 and December 2021 or parts of that period.

The scheme will be open to all companies, irrespective of their size and of the sector where they operate (with the exception of the financial sector).

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Under the scheme, limited amounts of aid will take the form of (i) tax exemptions and reductions; (ii) tax credits; and (iii) direct grants.

Given that most of the aid will be automatically granted and the aid ceilings will apply not only to the direct beneficiary but also to its affiliates, eligible beneficiaries will have to indicate in an ex ante self-declaration the amount of limited amounts of aid and support for uncovered fixed costs applied for. This should also allow the Italian authorities to better monitor compliance with the Temporary Framework, particularly for companies of the same group.

The Commission found that the Italian scheme is in line with the conditions set out in the Temporary Framework. In particular:

  • When it comes to limited amounts of aid, the aid (i) will not exceed €225,000 per company active in the primary production sector of agricultural products, €270,000 per company active in the fisheries and aquaculture sector and €1.8 million per company active in all the other sectors; and (ii) will be granted no later than 31 December 2021.
  • When it comes to support for uncovered fixed costs, the aid (i) will not exceed the overall amount of €10m per company; (ii) will cover uncovered fixed costs incurred during a period comprised between March 2020 and December 2021; (ii) will be granted only to companies that were not considered to be in difficulty already on 31 December 2019, with the exception of micro and small companies that are eligible even if already in difficulty; and (iii) 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 aid measure under EU state aid rules.

Background

The Commission has adopted a Temporary Framework to enable member states to use the full flexibility foreseen under state aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework, as amended on 3 April, 8 May, 29 June, 13 October 2020 and 28 January 2021, provides for the following types of aid, which can be granted by member states:

(i) Direct grants, equity injections, selective tax advantages and advance payments of up to €225,000 to a company active in the primary agricultural sector, €270,000 to a company active in the fishery and aquaculture sector and €1.8 million to a company active in all other sectors to address its urgent liquidity needs. Member states can also give, up to the nominal value of €1.8m per company zero-interest loans or guarantees on loans covering 100% of the risk, except in the primary agriculture sector and in the fishery and aquaculture sector, where the limits of €225,000 and €270,000 per company respectively, apply.

(ii) State guarantees for loans taken by companies to ensure banks keep providing loans to the customers who need them. These state guarantees can cover up to 90% of risk on loans to help businesses cover immediate working capital and investment needs.

(iii) Subsidised public loans to companies (senior and subordinated debt) with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.

(iv) Safeguards for banks that channel State aid to the real economy that such aid is considered as direct aid to the banks' customers, not to the banks themselves, and gives guidance on how to ensure minimal distortion of competition between banks.

(v) Public short-term export credit insurance for all countries, without the need for the member state in question to demonstrate that the respective country is temporarily “non-marketable”.

(vi) Support for coronavirus related research and development (R&D) to address the current health crisis in the form of direct grants, repayable advances or tax advantages. A bonus may be granted for cross-border cooperation projects between member states.

(vii) Support for the construction and upscaling of testing facilities to develop and test products (including vaccines, ventilators and protective clothing) useful to tackle the coronavirus outbreak, up to first industrial deployment. This can take the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.

(viii) Support for the production of products relevant to tackle the coronavirus outbreak in the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one member state and when the investment is concluded within two months after the granting of the aid.

(ix) Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions for those sectors, regions or for types of companies that are hit the hardest by the outbreak.

(x) Targeted support in the form of wage subsidies for employees for those companies in sectors or regions that have suffered most from the coronavirus outbreak, and would otherwise have had to lay off personnel.

(xi) Targeted recapitalisation aid to non-financial companies, if no other appropriate solution is available. Safeguards are in place to avoid undue distortions of competition in the Single Market: conditions on the necessity, appropriateness and size of intervention; conditions on the State's entry in the capital of companies and remuneration; conditions regarding the exit of the State from the capital of the companies concerned; conditions regarding governance including dividend ban and remuneration caps for senior management; prohibition of cross-subsidisation and acquisition ban and additional measures to limit competition distortions; transparency and reporting requirements.

(xii) Support for uncovered fixed costs for companies facing a decline in turnover during the eligible period of at least 30% compared to the same period of 2019 in the context of the coronavirus outbreak. The support will contribute to a part of the beneficiaries' fixed costs that are not covered by their revenues, up to a maximum amount of €10m per undertaking.

The Commission will also enable member states to convert until 31 December 2022 repayable instruments (e.g. guarantees, loans, repayable advances) granted under the Temporary Framework into other forms of aid, such as direct grants, provided the conditions of the Temporary Framework are met.

The Temporary Framework enables member states to combine all support measures with each other, except for loans and guarantees for the same loan and exceeding the thresholds foreseen by the Temporary Framework. It also enables Member States to combine all support measures granted under the Temporary Framework with existing possibilities to grant de minimis to a company of up to €25,000 over three fiscal years for companies active in the primary agricultural sector, €30,000 over three fiscal years for companies active in the fishery and aquaculture sector and €200,000 over three fiscal years for companies active in all other sectors. At the same time, member states have to commit to avoid undue cumulation of support measures for the same companies to limit support to meet their actual needs.

Furthermore, the Temporary Framework complements the many other possibilities already available to member states to mitigate the socio-economic impact of the coronavirus outbreak, in line with EU State aid rules. On 13 March 2020, the Commission adopted a Communication on a Co-ordinated economic response to the COVID-19 outbreak setting out these possibilities. For example, member states can make generally applicable changes in favour of businesses (e.g. deferring taxes, or subsidising short-time work across all sectors), which fall outside state aid rules. They can also grant compensation to companies for damage suffered due to and directly caused by the coronavirus outbreak.

The Temporary Framework will be in place until the end of December 2021. With a view to ensuring legal certainty, the Commission will assess before this date if it needs to be extended.

The non-confidential version of the decision will be made available under the case number SA.62668 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.

More information on the Temporary Framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.

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COVID-19 triggered important changes in working time, but overall trends appear the same

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The COVID-19 pandemic led to important changes in working time regulation across the EU with the emergence of greater flexibility in short-time working schemes; the adaptation of working time regimes to telework; and temporary derogations from working time regulations mostly to ensure the continuous functioning of essential services. However, despite economic restrictions significantly reducing working time in a number of sectors, overall trends do not fully reflect this due to the polarisation of working time in different sectors; with some workers left with little to do due to restrictions, and others facing burnout due to long working hours and arduous demands.Eurofound’s new report Working time in 2019-2020 documents the most relevant changes in working time regulation after the onset of the COVID-19 pandemic, including short-time working schemes, and approaches to telework for those able to work from home.

It also details policies and regulations to ensure the safe ongoing provision of essential services by workers continuing to work on site, including temporary regulations implemented under state-of-emergency provisions that led to the relaxation or derogation of labour rights in relation to working hours, rest and leave provisions. Extended working hours, limitations on rest periods and provisions to delay annual leave were applied in the health, care, transport and logistics sectors across the Union, including in Finland, France, Italy, Luxembourg, Poland and Portugal.The report shows that in 2020 the average collectively agreed working week in the EU stood at 37.8 hours – longest in Malta, Greece, and Croatia (40 hours), and lowest in France and Germany (35.6 hours).

On a sectoral level, the collectively agreed normal working week was shortest in public administration (38 hours) and longest in transport (39.2 hours).
Despite the fundamental changes that COVID-19 brought to the labour market, and associated pressures on individual sectors, the data for overall usual weekly working hours of full-time employees continued to decrease at a broadly consistent pace in most member states, ranging from a reduction in 0.1 Slovenia to 0.3 hours in Austria, Ireland, Portugal and Spain. In Denmark, Estonia, France, Latvia, Lithuania and the Netherlands, usual weekly hours in 2020 remained the same as in 2019. Data also show that the difference between member states that joined prior to 2004 (the EU14) and those that joined in or after 2004 (the EU13) remained stable at around 1 hour less, a constant since 2011.

Click here for background data.

Collectively agreed annual working hours also reflect the continued differences between member states. While full-time workers in the EU27, as per collectively agreed normal working hours, should have worked 1,703 hours on average in 2020, this was lower at 1,665 hours in the EU14 and higher in the EU13 at 1,809 hours. Hungary and Poland, where collective bargaining does not have a relevant role in regulating working hours, had the longest annual working hours, the equivalent of nearly seven weeks more than their counterparts in Germany, which had the shortest collectively agreed annual working hours.

Click here for background data

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The report also shows the dividend of collective agreements for workers in terms of paid holidays. While the minimum paid annual leave entitlement in the EU is 20 days, some member states have increased this minimum entitlement through legislation or by collective agreement. If entitlements established through collective bargaining are factored in, the average annual paid leave stood at 24.5 days in the EU-27. This is higher in the EU-14 (25.6 days) than in the EU-13 (21.4 days).

Speaking on the publishing of the report, Eurofound Executive Director Ivailo Kalfin emphasized that the analysis of changes in the labour market and working time regulation in the research is an important contextualisation of broader trend data: "This report offers vital data with regards to working time trends and continued disparities in collectively agreed working time between member states, but equally important is the analysis that complements this trend data, which considers the significant labour market disruption and changes in working conditions that we have seen in Europe during this period."

Download the report

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Commission approves €700 million French scheme for certain retailers and services affected by the coronavirus pandemic

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The European Commission has approved, under the EU state aid rules, a €700 million French scheme to support certain retailers and services affected by the coronavirus pandemic and restrictive measures taken by the French government to limit the spread of the virus.

Executive Vice President Margrethe Vestager (pictured) in charge of competition policy said: "Closures to limit the spread of the pandemic have resulted in very significant losses in turnover for some retailers and services. This €700 million scheme will allow France to partially compensate those companies for the losses incurred. We are continuing to work in close cooperation with member states to find workable solutions to mitigate the economic impact of the coronavirus pandemic, in line with EU rules."

The French scheme

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France notified the Commission of a €700m scheme to compensate certain retailers and services for losses incurred as a result of the French government's administrative closure measures to limit the spread of the coronavirus.

As a direct result of those restrictive measures, the turnover of the companies concerned declined, whereas their costs, particularly rent and other fixed costs, could not be adjusted downwards.

The scheme will be open to certain retail outlets (furniture, clothing, IT, sports goods, opticians, jewellers) and some services (repair of personal and household goods, hairdressing and beauty care) which were required to close down for periods between February and May 2021.

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Eligible beneficiaries under the scheme will be able to obtain compensation in the form of direct grants for an amount not exceeding the amount of rent paid during the closure periods, minus, where applicable, any revenue from an increase in online sales and other forms of compensation, such as amounts paid out by insurance companies.

With a view to avoiding overcompensation for losses incurred, the scheme also provides for a compensation cap for: (i) companies which were already recording losses in 2019; (ii) companies with a high proportion of online sales; and (iii) companies receiving more than €4m in aid per month.

The Commission assessed the measure under Article 107(2)(b) TFEU, which authorises Member States to compensate specific companies or sectors for damage directly caused by exceptional occurrences like the coronavirus pandemic.

The Commission took the view that the French aid scheme will compensate for losses that are directly linked to the coronavirus pandemic. It also found that the measure was proportionate in so far as the compensation envisaged did not exceed the amount necessary to make good the losses, taking into account the cap provided for in the specific cases referred to above.

The Commission therefore concluded that the scheme is in line with the EU State aid rules.

Background

Financial support from EU or national funds granted to health services or other public services to tackle the coronavirus situation falls outside the scope of State aid control. The same applies to any public financial support given directly to citizens. Similarly, public support measures that are available to all companies such as wage subsidies and suspension of payments of corporate and value added taxes or social security contributions do not fall under state aid control and do not require the Commission's approval under the EU state aid rules. In all these cases, member states can act immediately. When the state aid rules are applicable, member states can design ample aid measures to support specific companies or sectors suffering from the consequences of the coronavirus pandemic in line with the existing EU state aid framework.

On 13 March 2020 the Commission adopted a European co-ordinated response to counter the economic impact of the Coronavirus pandemic setting out these possibilities.

In that connection, for example:

  • Member states can compensate specific companies or specific sectors (in the form of schemes) for losses incurred and directly caused by exceptional occurrences, such as those caused by the coronavirus pandemic. Article 107(2)(b) TFEU makes provision to that effect;
  • the state aid rules based on Article 107(3)(c) TFEU enable member states to help companies affected by liquidity shortages and needing urgent rescue, and aid;
  • this can be complemented by a variety of additional measures, such as under the de minimis Regulation and the General Block Exemption Regulation, which can also be put in place by member states immediately, without the Commission's involvement.

In the event of particularly severe economic situations, such as the one currently faced by all member states due to the ongoing coronavirus pandemic, the EU State aid rules allow member states to grant aid to remedy a serious disturbance in their economy. Article 107(3)(b) TFEU makes provision to that effect.

On 19 March 2020 the Commission adopted a Temporary Framework for State aid measures on the basis of Article 107(3)(b) TFEU to enable Member States to make full use of the flexibility provided for under the State aid rules to support the economy in the context of the coronavirus pandemic.

 The Temporary Framework, as amended on 3 April, 8 May, 29 June, 13 October 2020 and 28 January 2021 provides for the following types of aid to be granted by the member states: i) direct grants, equity injections, selective tax breaks and advance payments; ii) state guarantees for loans taken out by companies; iii) subsidised public loans to companies, including subordinated loans; iv) safeguards for banks that channel state aid to the real economy; v) public short-term export credit insurance; vi) support for coronavirus-related research and development (R&D); vii) support for the construction and upscaling of testing facilities; viii) support for the production of products relevant to tackling the coronavirus pandemic; ix) targeted support in the form of deferral of tax payments and/or suspension of social security contributions; x) targeted support in the form of wage subsidies for employees; xi) targeted support in the form of equity and/or hybrid capital instruments; xii) support for uncovered fixed costs for companies facing a decline in turnover in the context of the coronavirus pandemic.

The Temporary Framework will be in place until the end of December 2021. With a view to ensuring legal certainty, the Commission will assess before that date whether it needs to be extended.

The non-confidential version of the decision will be made available under case number SA.62625 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.

More information on the Temporary Framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.

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