European Union: State Aid Measures For The Real Economy

This article was originally published in the schoenherr roadmap`10 - if you would like to receive a complimentary copy of this publication, please visit:

While the situation on the financial markets appears to be improving, the full impact of the financial crisis on the real economy is only slowly starting to be felt. Following comprehensive and specifically crisis-related State aid rules for the banking sector1, the European Commission (the Commission) has for almost a year also applied modified rules for the real economy to support access to financing. These rules give beneficiary undertakings additional opportunities to escape a credit squeeze.

Serious Disturbance, Significant Aid

As a consequence of the current crisis, banks have become much more risk averse in their lending activities than in previous years – despite comprehensive support measures from EU member states. In the real (i.e. not financial) economy, this has led to the oft-cited credit squeeze affecting, in particular, small and medium-sized undertakings (SMEs). Although the financial apparatus provides for sufficient credit capital, the risk surcharge incurred renders conditions more and more unattractive.

The Commission has recognised this problem and since 17 December 2008 has applied a temporary Community framework for State aid measures to support access to finance in the current crisis – temporarily altering the existing State aid rules through 31 December 20102. These measures shall unleash and facilitate bank lending to companies. In this context, the Commission particularly points out that this relaxation of State aid rules will further guarantee investments in environmental projects and, thus, ecologically sustainable growth of the economy.

All of the modifications of the State aid rules outlined below must be notified to the Commission, i.e. they are subject to the standstill clause laid down in Article 87 of the EC Treaty prior to their approval. In order to guarantee that the support measures put in place by the member states for the benefit of undertakings can nevertheless be made of use as quickly as possible, the Commission presupposes that most of the additional room for aid will be notified and implemented as so-called aid schemes. Once an aid scheme of a member state has been approved, further aid may be granted within its scope without prior individual notification.

The legal basis for the possibilities of approval provided for within the temporary Community framework is Article 87(3)(b) of the EC Treaty. Pursuant to this provision, which was virtually unknown before the crisis, the Commission is entitled to declare aid compatible with the common market in order "to remedy a serious disturbance" in the economy of a member state. The Commission considers that the current global crisis requires such exceptional policy responses.

More Than De Minimis

While, according to the current de minimis regulation of the Commission, Article 87(1) of the EC Treaty will not apply to aid measures if the total de minimis aid granted to any one undertaking does not exceed EUR 200,000 over any period of three fiscal years3, the Commission now allows a significantly higher threshold of EUR 500,000. Further conditions that must be met are as follows: (i) the firm was not (yet) in difficulty on 1 July 2008, (ii) the member state obtains a declaration from the undertaking concerned about all de minimis aid and any other aid received and (iii) the member state checks adherence to the ceiling of EUR 500,000.

As regards Austria, the Commission authorised a temporary aid scheme on 23 March 2009 according to which aid may be granted in the form of direct grants, interest rate subsidies, subsidised public loans and public guarantees up to a maximum amount of EUR 500,000 per company4. According to reports, many undertakings make use of this scheme.

Subsidised Loan Guarantees

In its notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees5, the Commission already explained the conditions under which the existence of State aid can be entirely ruled out.

The notice does not, however, indicate any criteria for the assessment of the compatibility of guarantees with the common market. The Commission now makes up for that deficit – again on the basis of Article 87(3)b) of the EC Treaty. In particular, the Commission specifies in an Annex to the Community Framework the "safe harbour premiums" in basis points, thus enabling undertakings to correctly apply this possibility of aid.

Aid In The Form Of Subsidised Interest Rates

In order to tackle the credit squeeze, the Commission now also accepts that public or private loans are granted at an interest rate which is at least equal to the central bank overnight rate6 plus a premium equal to the difference between the average one year interbank rate and the average of the central bank overnight rate over the period from 1 January 2007 to 30 June 2008, plus the credit risk premium corresponding to the risk profile of the recipient.

Aid For The Production Of "Green Products"

As already mentioned, the Commission wants to pursue its environmental targets with a high priority despite the financial crisis. As to the production of certain clearly defined "green products", it should therefore be possible to authorise additional measures in the form of subsidised loans.

Risk Capital Investments And Export Credit Insurance

Finally, the risk capital market within the Community has also been adversely affected by the crisis. And risk capital investments are of major economic importance, particularly for SMEs. In its guidelines adopted in 20067, the Commission has set out the conditions under which State aid supporting risk capital investments may be considered compatible with the common market in accordance with Article 87(3)(c) of the EC Treaty. The stipulated provisions will now be significantly relaxed on the basis of Article 87(3)(b) of the EC Treaty until 31 December 2010.

Similarly, the currently applicable rules with respect to the State aid assessment of export credit insurance8 will be adapted to the new economic situation. Whereas "marketable" risks could not up to now be covered by export credit insurance with the support of member states, a respective risk may now also be covered by the member state if it is able to demonstrate a lack of market. Thus, the Commission extends the applicability of the so-called escape clause (point 4.4. of the Communication on short-term export credit insurance) for member states.

In the current global crisis, not only the financial economy but also the real economy may benefit from a more generous State aid regime. Austria, however, has so far not made good use of the additional opportunities. It may also make sense for non-banking institutions to take advantage of the new, more intensive State aid measures. But time is short: As things now stand, this window of opportunity closes on 31 December 2010.

This article was originally published in the schoenherr roadmap`10 - if you would like to receive a complimentary copy of this publication, please visit:


1. A comprehensive collection of all measures is available at the website of the commission at

2. OJ 2009 C 83/1.

3. OJ 2006 L 379/5.

4. IP/09/454.

5. OJ 2008 C 155/10

6. cf. Commission Communication on the revision of the method for setting the reference and discount rates, OJ 2008 C 14/6.

7. Guidelines on State aid to promote risk capital investments in small and medium-sized enterprises, OJ 2006 C 194/2.

8. Communication from the Commission to Member States pursuant to Article(1) of the EC Treaty applying Articles 92 and 93 of the Treaty to short-term export-credit insurance, OJ 1997 C 281/4.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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