State Aid: the vaccine the economy needs?

SÉRVULO PUBLICATIONS 16 Mar 2020

The COVID-19 outbreak has led to severe (although necessary) actions from Member States that restrict the normal activity of several economic sectors such as tourism, restauration and commerce. These measures, unavoidably, cause serious difficulties to undertakings that are unable to function and finance themselves as usual. In turn, this creates a serious risk for the existence of these undertakings and damages the economy and the internal market. One of the measures that Member States can adopt to help mitigate these difficulties is to grant state aid in order to benefit the undertakings affected by this pandemic. However, despite the known conditions and limitations, Member States must notify the European Commission in order to grant state aid.

It is therefore necessary that the European Commission demonstrates the capacity to quickly respond to these requests as well as a positive collaborative spirit. On the 12^th of March of 2020, and for the first time, the Commission authorised an aid scheme notified by Denmark aimed at compensating organizers of events with more than a 1000 participants or targeted designated risk groups (such as the elderly) which were forced to cancel those events due to concerns over the outbreak of COVID-19. The decision was adopted within 24 hours and will provide 12 million euros to the covered undertakings.

The decision of the European Commission was based on the consideration that the aid was necessary to combat the damages caused by an exceptional event, which means an extraordinary and unpredictable event with significant economic impact. The European Commission also stated that, in graver circumstances such as the one currently unfolding in Italy (and Portugal), it could authorize state aid to remedy a serious disturbance to a Member State’s economy.

The Executive Vice-President of the European Commission, Margrethe Vestager, stated that the Commission “stand[s] ready to work with all Member States to ensure that possible national support measures to tackle the outbreak of the virus can be put in place as quickly and effectively as possible, in line with EU rules”.

In a press conference, the European Commission announced that it is currently working on a Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak (that has already been published and dissected by Sérvulo) similar to the Temporary Framework that was applicable during the financial crisis, to be applicable should the economic effects of COVID-19 prove to be more serious than predicted. Additionally, the Commission established contact points with Member States with a view on accelerating notification procedures and informing Member States of the options available to them under European Union Law.

All these measures imply a serious commitment by the European Union in aiding Member States fend off the nefarious economic effects that the COVID-19 outbreak has been causing all over Europe. It is to be expected, however, that more measures will be adopted at the European level to ensure the safety of the population and undertakings, without whom the stability of the internal market would be compromised in today’s turbulent time and in those that will follow.

Miguel Gorjão-Henriques | mgh@servulo.com

Francisco Marques de Azevedo | fma@servulo.com