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Italian prime minister Giuseppe Conte resigns

EU Reporter Correspondent

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Italian prime minister Giuseppe Conte (pictured) has resigned, according to the country's president. Conte survived two confidence votes in parliament last week, but then lost his absolute majority in the Senate after centrist ally and former PM Matteo Renzi defected. This has made it much more difficult for the premier to pass legislation or make decisions on the COVID-19 crisis, which has devastated Italy's long-suffering economy.

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Commission approves €40 million Italian aid measure to support coronavirus related research and development activities

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The European Commission has approved a €40 million Italian aid measure to support coronavirus related research and development (R&D) by biotechnology company ReiThera S.r.l. The measure was approved under the state aid Temporary Framework.

Executive Vice President Margrethe Vestager, in charge of competition policy, said: “This €40 million Italian measure will support research into a new vaccine against the coronavirus. We continue to work closely with member states to support measures that can help us find solutions to tackle the pandemic, in line with EU rules.”

The Italian aid measure

Italy notified to the Commission under the Temporary Framework a €40 million aid measure to support coronavirus related R&D activities by ReiThera S.r.l., a medium-sized biotechnology company located in the Lazio region. The public support will take the form of a direct grant.

The aim of the measure is to support the development of a novel coronavirus vaccine, contributing to finding solutions to respond to the current health crisis. The candidate vaccine developed by ReiThera has been evaluated in preclinical studies and in a phase I clinical study that has shown that it is safe in adult and elderly people. The measure will support the setting-up and implementation of the next development step, a phase II/III study to confirm safety and demonstrate efficacy.

The Commission found that this aid measure is in line with the conditions set out in the Temporary Framework. In particular, (i) the aid will cover less than 60% of the relevant R&D costs; and (ii) any results of the research activities will be made available to third parties in the European Economic Area at non-discriminatory market conditions through non-exclusive licences.

The Commission concluded that the Italian measure is necessary, appropriate and proportionate to fight the health crisis, in line with Article 107(3)(c) 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 €1.8 million 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 €10 million 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.61774 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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Italy extends COVID-19 travel curbs and eyes vaccination changes

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The Italian government on Monday (22 February) extended a ban on non-essential travel between the country’s 20 regions until March 27 as it looks to slow the spread of highly contagious coronavirus variants, writes Crispian Balmer.

Officials also said the health ministry was likely to accelerate vaccination efforts by telling regions to use all available doses rather than set aside some stock for second shots.

The ban on travel between regions was introduced just before Christmas and had been due to expire on 25 February, but officials fear a relaxation of restrictions could lead to a new surge in cases, driven by the so-called “British” variant.

In its first decisions on COVID-19, Prime Minister Mario Draghi’s new cabinet also extended restrictions on visiting family and friends, with no more than two adults allowed into another person’s home at the same time.

No visits are allowed in so-called red zones, where the tightest restrictions are in place. At present, no region is classified as “red” but some provinces, towns and villages have been designated as such.

Although the number of daily COVID-19 cases has fallen from around 40,000 in mid-November to under 15,000, the infection rate, measuring the percentage of tests that come back positive, has edged up in some areas and there are several hundred deaths from COVID-19 each day.

Italy’s official death toll stands at 95,718 - the second highest in Europe after Britain and seventh highest worldwide.

Like other European Union countries, Italy launched its anti-COVID-19 vaccination campaign at the end of December, and has administered 3.5 million shots including second shots. In all, it has received 4.69 million shots from vaccine manufacturers.

Britain has moved more quickly than its former EU partners, giving a first vaccine dose to more than 17.6 million people.

Inspired by the British example, Italian officials have questioned whether the country should use all the vaccines at its disposal now, rather than keeping reserves for recommended follow-up vaccinations.

La Stampa newspaper reported on Sunday that Draghi was set to pursue mass vaccinations using all available doses. Officials confirmed this was likely, but gave no time frame.

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Italy's new PM Draghi promises sweeping reforms, urges national unity

EU Reporter Correspondent

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Prime Minister Mario Draghi (pictured) called on Italians on Wednesday (17 February) to pull together to help rebuild the country following the coronavirus pandemic and promised his new government would introduce sweeping reforms to revitalise the battered economy, write Crispian Balmer, Gavin Jones and Angelo Amante.

In his maiden speech to parliament, the former head of the European Central Bank said his broad-based administration would throw all its efforts into defeating COVID-19, while looking to leave a stronger, greener nation for future generations.

“Today we have, as did the governments of the immediate post-war period, the possibility, or rather the responsibility, to launch a new reconstruction,” Draghi told the Senate, ahead of a mandatory confidence vote that he won by a huge margin.

His immediate priorities will be ensuring a smooth coronavirus vaccination campaign and re-writing plans for how to spend more than 200 billion euros ($240 billion) of European Union funds aimed at rebuilding the economy.

To guarantee the money is well spent, Draghi signalled that he wanted to overhaul the public administration, which is throttled by red tape, and the justice system, one of the slowest in Europe.

Draghi also put a strongly pro-European stamp on his administration, which includes parties such as the right-wing League which have been highly critical of the euro common currency and Brussels bureaucracy in the past.

“Supporting this government means sharing the irreversibility of the choice of the euro, it means sharing the prospect of an increasingly integrated European Union that will arrive at a common public budget,” said Draghi, who received a standing ovation from senators after his 50-minute address.

Related CoverageFactbox: Key policy points in Italy PM Draghi's maiden speech to Senate

DAUNTING CHALLENGES

If he succeeds in his mission, Draghi will not only help revive Italy after the worst recession since World War Two, but will also give a boost to the whole EU, which has long fretted over Italy’s chronic sluggishness.

Draghi is among Europe’s most respected figures after his eight-year stewardship of the ECB, and his nomination as prime minister has been hailed by investors - as reflected in Italian bond sales on Tuesday that drew record demand.

Investment bank Morgan Stanley on Wednesday predicted a major improvement in Italy’s closely-watched bond spreads - the premium investors demand to hold Italian government bonds rather than German debt - and a double-digit outperformance by its stock market.

However, Draghi faces daunting challenges, with many sectors of the economy stalled and some companies only surviving thanks to state handouts. Draghi said he could not protect every job or business, adding: “Some will have to change, even radically.”

His cabinet will have to move fast. It can only govern for a maximum two years, with national elections due in early 2023.Slideshow ( 2 images )

Draghi said he would call on the army to help speed up the anti-coronavirus vaccination campaign, but warned the disease would force lasting changes in a country which has registered some 94,000 deaths -- the second highest toll in Europe.

“The main duty to which we are called, all of us... is to fight the pandemic by all means and to safeguard the lives of our fellow citizens,” he said.

Draghi won Wednesday’s confidence vote in the 315-seat Senate by 262 to 40 and he is certain to secure a similar sized victory in the lower house on Thursday after all but one party -- the far-right Brothers of Italy -- rallied to his side.

As expected around 15 members of his largest parliamentary partner, the 5-Star Movement, defied their leadership and voted against Draghi, objecting to a technocrat taking charge and refusing to back a coalition that included old political foes.

Additional reporting by Angelo Amante, Giulia Segreti and Giuseppe Fonte

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