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Commission approves €120 million Luxembourg scheme to support uncovered fixed costs of companies affected by coronavirus outbreak

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The European Commission has approved a Luxembourg State aid scheme to support the uncovered fixed costs of 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 Luxembourg, as in the rest of Europe, have seen their revenues significantly decline because of the restrictive measures necessary to limit the spread of the coronavirus. This scheme will enable Luxembourg to help these companies face their fixed costs that are not covered by revenues during this difficult time. We continue to work 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 Luxembourgish support measure

Following the Commission's approval of eight Luxembourg State aid schemes to support companies facing economic difficulties due to the coronavirus outbreak, Luxembourg notified to the Commission a scheme to further support companies under the Temporary Framework. Under the scheme, Luxembourg plans to provide economic assistance to certain businesses, including those operating in the hospitality, accommodation and entertainment sectors, in order to help them face their liquidity shortages related to the coronavirus outbreak. The measure has an estimated budget of up to €120 million.

Under the scheme, support will take the form of direct grants. The measure will allow the authorities of Luxembourg to support companies that suffered from a monthly turnover decline between November 2020 and March 2021 of at least 40% compared to the same period of 2019. The aid will help them pay 70% (90% in case of micro and small companies) of their fixed costs that are not covered by revenues, up to a maximum of €1 million per undertaking.

The Commission found that the Luxembourg scheme is in line with the conditions set out in the Temporary Framework. In particular, the aid (i) will be granted no later than 30 June 2021; (ii) will cover uncovered fixed costs incurred during a period comprised between 1 March 2020 and 30 June 2021; (iii) will be granted to undertakings that suffer a decline in turnover during the eligible period of at least 30% compared to the same period in 2019; (iv) will cover at maximum 70% of the uncovered fixed costs (90% in case of micro and small companies); (v) will not exceed EUR 3 million per undertaking; (vi) will be granted only to companies that were not considered to be in difficulty on 31 December 2019, with the exception of micro and small companies that are eligible even if already in difficulty. Finally, Luxembourg will ensure that the rules for cumulation of aid provided under the Temporary Framework are respected across all measures.

The Commission concluded that the measure under the scheme 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 April8 May29 June and 13 October 2020, 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 €100,000 to a company active in the primary agricultural sector, €120,000 to a company active in the fishery and aquaculture sector and €800,000 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 €800,000 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 €100,000 and €120,000 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) Subsidized 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 recapitalization 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-subsidization 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 €3 million per undertaking.

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 Coordinated 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 subsidizing 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 June 2021. As solvency issues may materialize only at a later stage as this crisis evolves, for recapitalization measures only the Commission has extended this period until the end of September 2021. With a view to ensuring legal certainty, the Commission will assess before those dates if it needs to be extended.

The non-confidential version of the decision will be made available under the case number SA.59322 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 State Aid 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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Dutch PM condemns lockdown riots as 'criminal violence'

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Dutch Prime Minister Mark Rutte (pictured) on Monday (25 January) condemned riots across the country at the weekend in which demonstrators attacked police and set fires to protest against a night-time curfew to slow the spread of the coronavirus, calling them “criminal violence”, writes .

The police said hundreds of people had been detained after incidents that began on Saturday evening and lasted until the early hours of Monday, including some in which rioters threw rocks and in one case knives at police and burned down a COVID-19 testing station.

“This has nothing to do with protest, this is criminal violence and we will treat it as such,” Rutte told reporters outside his office in The Hague.

Schools and non-essential shops in the Netherlands have been shut since mid-December, following the closure of bars and restaurants two months earlier.

Rutte’s government added the curfew as an additional lockdown measure from Saturday over fears that the British variant of COVID-19 may soon lead to an increase in cases.

There have been 13,540 deaths in the Netherlands from COVID-19 and 944,000 infections.

The police trade union NPB said there could be more protests ahead, as people grow increasingly frustrated with the country’s months-long lockdown.

“We haven’t seen so much violence in 40 years,” union board member Koen Simmers said on television program Nieuwsuur.

Police used water cannon, dogs and officers on horseback to disperse a protest in central Amsterdam on Sunday afternoon. Nearly 200 people, some of them throwing stones and fireworks, were detained in the city.

In the southern city of Eindhoven, looters plundered stores at the train station and set cars and bikes on fire.

When police said the demonstrators were violating the country’s current lockdown rules “they took weapons out of their pockets and immediately attacked the police”, Eindhoven Mayor John Jorritsma said.

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Head of French health regulatory body: COVID situation is 'worrying'

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The COVID-19 situation in France is worrying, the head of the country’s Haute Autorite de Sante (HAS) health regulator told France Inter radio on Monday (25 January), as President Emmanuel Macron’s government considers a new lockdown, write Sudip Kar-Gupta and Dominique Vidalon.

France has the world’s seventh-highest COVID-19 death toll, with more than 73,000 deaths.

“It is a worrying moment. We are looking at the figures, day by day. We need to take measures pretty quickly....but at the same time, not too hastily,” said HAS head Dominique Le Guludec.

Jean-François Delfraissy, head of the scientific council that advises the government on COVID-19, had said on Sunday that France probably needed a third national lockdown, perhaps as early as the February school holidays, because of the circulation of new variants of the virus.

French European Affairs Minister Clement Beaune, when asked about this on French radio on Monday, replied that no firm decision had been taken on the matter.

France is currently in a nationwide 18h to 6h curfew, in a bid to slow down the spread of the virus, but the average number of new infections has increased from 18,000 per day to more than 20,000.

Geoffroy Roux de Bézieux, head of the MEDEF French business lobby group, said he would call on the government to keep as many businesses and schools open as possible in any new lockdown, to protect the economy and help children’s education.

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EU urges AstraZeneca to speed up vaccine deliveries amid 'supply shock'

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The European Union has urged AstraZeneca to find ways to swiftly deliver vaccines after the company announced a large cut in supplies of its COVID-19 shot to the bloc, as news emerged the drugmaker also faced supply problems elsewhere, write and

In a sign of the EU’s frustration - after Pfizer also announced supply delays earlier in January - a senior EU official told Reuters the bloc would in the coming days require pharmaceutical companies to register COVID-19 vaccine exports.

AstraZeneca, which developed its shot with Oxford University, told the EU on Friday it could not meet agreed supply targets up to the end of March, with an EU official involved in the talks telling Reuters that meant a 60% cut to 31 million doses.

“We expect the company to find solutions and to exploit all possible flexibilities to deliver swiftly,” an EU Commission spokesman said, adding the head of the EU executive Ursula von der Leyen had a call earlier on Monday with AstraZeneca’s chief Pascal Soriot to remind him of the firm’s commitments.

A spokesman for AstraZeneca said Soriot told von der Leyen the company was doing everything it could to bring its vaccine to millions of Europeans as soon as possible.

News emerged on Monday that the company faces wider supply problems.

Australia’s Health Minister Greg Hunt told reporters AstraZeneca had advised the country it had experienced “a significant supply shock”, which would cut supplies in March below what was agreed. He did not provide figures.

Thailand’s Health Minister Anutin Charnvirakul said AstraZeneca would be supplying 150,000 doses instead of the 200,000 planned, and far less than the 1 million shots the country had initially requested.

AstraZeneca declined to comment on global supply issues.

The senior EU official said the bloc had a contractual right to check the company’s books to assess production and deliveries, a move that could imply the EU fears doses being diverted from Europe to other buyers outside the bloc.

AstraZeneca has received an upfront payment of 336 million euros ($409 million) from the EU, another official told Reuters when the 27-nation bloc sealed a supply deal with the company in August for at least 300 million doses - the first signed by the EU to secure COVID-19 shots..

Under advance purchase deals sealed during the pandemic, the EU makes down-payments to companies to secure doses, with the money expected to be mostly used to expand production capacity.

“Initial volumes will be lower than originally anticipated due to reduced yields at a manufacturing site within our European supply chain,” AstraZeneca said on Friday.

The site is a viral vectors factory in Belgium run by the drugmaker’s partner Novasep.

Viral vectors are produced in genetically modified living cells that have to be nurtured in bioreactors. The complex procedure requires fine-tuning of various inputs and variables to arrive at consistently high yields.

“The flimsy justification that there are difficulties in the EU supply chain but not elsewhere does not hold water, as it is of course no problem to get the vaccine from the UK to the continent,” said EU lawmaker Peter Liese, who is from the same party as German Chancellor Angela Merkel.

The EU called a meeting with AstraZeneca after Friday’s (22 January) announcement to seek further clarification. The meeting started at 1230 CET on Monday.

The EU official involved in the talks with AstraZeneca said expectations were not high for the meeting, in which the company will be asked to better explain the delays.

Earlier in January, Pfizer, which is currently the largest supplier of COVID-19 vaccines to the EU, announced delays of nearly a month to its shipments, but hours later revised this to say the delays would last only a week.

EU contracts with vaccine makers are confidential, but the EU official involved in the talks did not rule out penalties for AstraZeneca, given the large revision to its commitments. However, the source did not elaborate on what could trigger the penalties. “We are not there yet,” the official added.

“AstraZeneca has been contractually obligated to produce since as early as October and they are apparently delivering to other parts of the world, including the UK without delay,” Liese said.

AstraZeneca’s vaccine is expected to be approved for use in the EU on Jan. 29, with first deliveries expected from 15 February.

($1 = €0.8214)

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