State aid rules & the Greek State’s measures to support the economy

By Konstantina I.Tzerefou, Associate, Koutalidis Law Firm &

Christina Kechagia-Tsiakiri, LLM, Associate, Koutalidis Law Firm
 

1.       How was the arsenal of State aid rules been implemented to combat the economic and societal upheaval caused by COVID-19 at European level?

The recent outbreak of Coronavirus that placed global economy in turmoil necessitated an immediate response both at European and national level. Due to the pandemic, both the supply and demand channels have been severally disrupted, while there is a negative effect on investment plans and liquidity capacity. To mitigate the consequences of the pandemic, the European Commission decided to facilitate, under specific compatibility conditions, the granting of State aid by EU member states in support of firms that were “directly affected” by the COVID-19 situation.

In more detail, the European Commission adopted on 19 March 2020[1] a Temporary Framework, as amended on 3 April 2020, giving - on the basis of paragraph 3 (b) of Art. 107 TFEU - member states some leeway to support the economy and prevent liquidity shortages in relation to businesses facing financial difficulties aggravated by the COVID-19 outbreak, irrespective of their field of activity, in order to preserve their continuity. To that effect, the Commission will rapidly assess – as there is a presumption of compatibility under Article 107 (3)(b) – notified measures pertaining to i) aid in form of direct grants, repayable advances or tax advantages, ii) aid in form of guarantees and subsidized interest rates on loans, specific caveats apply when the aid is channeled through credit institutions to ensure that no indirect aid is granted to credit or other financial institutions, iii) short-term export credit insurance. The abovementioned aid measures, will be deemed compatible with the State aid regime provided that the aid does not exceed 800 000 per undertaking,  that there is a scheme with an estimated budget, that the aid is granted no later than 31 December 2020, that the aid is not granted to undertakings that were in difficulty on 31 December 2019, that the aid granted to undertakings active in the processing and marketing of agricultural should not be passed on to primary producers and should not be fixed on the basis or the price or quantity of products  purchased from primary producers.

Moreover, member states can, inter alia, notify aid schemes to the Commission in support of companies facing an imminent bankruptcy threat due to the COVID-19 outbreak, on the basis of Art. 107 (3)(c) TFEU. Finally, with respect to sectors that were directly hit by the outbreak, such as transport, tourism, culture, hospitality and retail, member states can notify damage compensation measures to the Commission, which the latter will assess under Article 107 (2)(b) TFEU.
 

2.       What type of measures can be adopted by member states aiming at supporting the economy in times of economic turbulence that fall outside the scope of State aid control?

As the Commission clearly stipulated in its Communication, dated 13 March 2020, Member States can adopt support measures, alleviating financial strains, that do not require prior notification and approval by the Commission, given that certain conditions are satisfied, such as:

i)                    Wage subsidies and suspension of payments of corporate and value added taxes or social contributions, provided that such schemes are applicable to all companies;

ii)                   Direct support to consumers, e.g. for cancelled services or tickets that are not reimbursed by the operators concerned;

iii)                 State aid measures that fall under the de minimis Regulation[2] and the General Block Exemption Regulation (“GBER”).[3]

 

3.       What type of State aid measures has the Greek Government adopted so far to help Greek companies in need amidst the COVID-19 exceptional circumstances?

In order to halt the spread of COVID-19, the Greek Authorities imposed strict restrictions on social and business activities, such as the compulsory closure of enterprises, which heavily impacted supply and demand conditions on the market. According to conservative estimates, more than 600 000 private enterprises – employing more than 1.2 million employees and yielding a monthly turnover of approximately EUR 8.3 billion - and more than 550 000 self-employed and freelancers, will cease their activities or be severally impacted by the COVID-19 situation, which signifies an imminent economic recession.

In order to moderate the negative economic and societal impact of the COVID-19 outbreak and the imposed restrictions, the Greek Government has announced a EUR 3.8 billion package of aid measures aiming to ensure that “sufficient liquidity remains available in the market, to counter the serious disturbance inflicted upon the economy by the outbreak and to preserve the continuity of economic activity during and after the outbreak.” The Greek Government has already notified before the Commission support measures under the Temporary Framework and received the green light by the EU watchdog for 5 aid schemes, as described below. We note that the granted aid under the approved schemes shall be non-refundable, tax free and shall not be offset against any debt.

1.       Repayable Advance Scheme (RAS) (approved on 07.04.2020)[4]

Greece notified to the Commission a repayable advances scheme amounting to an estimated €1 billion under the Temporary Framework to support companies affected by the coronavirus outbreak. According to the estimations of the Greek authorities the number of beneficiaries should be around 500.000.

The measure will be available to all undertakings – including proprietorship - seated in Greece, impacted by the COVID-19 crisis that cumulatively fulfil the following criteria: (i) they had between 1 and 500 employees on 30 March 2020; (ii) must not have become inactive taxpayers at least since April 2019; and (iii) must have suffered a reduction in their business activity of at least 30% as a result of the COVID-19 crisis compared to the average business activity of the corresponding period in the preceding three years or another equivalent period. The beneficiaries receiving aid shall not be undertakings in difficulty according to the GBER or shall not have been undertakings in difficulty until 31 December.

The amount for each beneficiary will correspond to a proportion of their turnover reduction, taking into account the losses incurred, the specific business type features and other COVID-19 support measures from which the undertaking has benefitted.

Granting Authority: The aid will be disbursed by the Independent Authority for Public Revenue (AADE) directly to the undertakings. 

Duration: Support under this scheme will be granted until 30 June 2020.

 

2.       Grants to small and medium-sized enterprises (SMEs) to support their loan obligations (approved on 08.04.2020) [5]

The measure provides aid in the form of grants in order to support the availability of working capital for SMEs and to relieve these SMEs of costs, which they would have had to bear under normal market conditions. The scheme aims to cover interest up to EUR 800,000 per company on existing debt obligations (fixed-maturity loans, bonds or bank overdrafts) for a 3-month period that may be extended for another 2 months, by decision of the Deputy Minister of Development and Investment. Eligible under the measure are interests, payable as of 1 April 2020, on fixed-maturity loans, bonds and overdraft, concluded before 1 April 2020 and performing on 31 December 2019. In particular, for overdrafts, the measure only covers interest up to the debt balance on 31 March 2020. The estimated budget for the scheme amounts to EUR 1.2 billion.

The advantage granted by the measure is selective: it applies to SMEs that are active in sectors particularly affected by the outbreak, as defined in the list of activities (NACE codes), specified in the call for application for aid and solvent, meaning that they were not already in difficulty within the meaning of the GBER on 31 December 2019. Financial institutions are explicitly excluded from the measure. Undertakings active in the fishery and aquaculture sector and in the primary production of agricultural products are not eligible for aid.

In conclusion, the scheme will apply to the whole territory of Greece and will be open to all SMEs affected by the COVID-19 outbreak, provided that certain criteria are met. In particular: (i) the aid amounts do not exceed the threshold foreseen by the Temporary Framework, i.e. EUR 800,000 per undertaking (ii) the grants are granted only to solvent enterprises, (iii) the scheme is of temporary nature, and (iv) is proportionate to remedy the consequences of the serious disturbance caused by the coronavirus outbreak.

Granting Authority: The aid will be administered by the Managing Authority of the Operational Programme Entrepreneurship, Competitiveness and Innovation (EPANEK).

Duration: Aid may be granted under the measure as from its approval until 31.12.2020.

 

3.       Capped business loans portfolio guarantees for net working capital loans (approved on 03.04.2020, amended on 30.04.2020)[6]

The measure provides for the granting of aid in the form of guarantees on loans and subsidization of guarantees (‘Capped business loans portfolio guarantees for new working capital loans in the current COVID-19 outbreak’) under the Temporary Framework. The notified measure enables the granting of guarantees on new working capital loans to help Greek businesses, regardless of their size, cover immediate working capital needs and ensure continuity of their activities amidst the pandemic. The Greek authorities expect to grant guarantees of up to EUR 2 billion on loans, which will result in up to EUR 8 billion of new working capital loans to the Greek economy provided by the financial intermediaries. The measure will be implemented through the issuance of guarantees by the Hellenic Development Bank and will partially guarantee new and eligible, i.e. with a maturity of 1 to 5 years, amortising and balloon working capital loans originated by financial intermediaries, in line with the level of guarantee premiums of the Temporary Framework. Undertakings that will not qualify as beneficiaries of the measure are financial intermediaries, undertakings active in aquaculture, undertakings active in agriculture and in sectors non-eligible by the European Regional Development Fund. Moreover, aid under this measure cannot be granted to undertakings that are or were in difficulty within the meaning of the General Block Exemption Regulation. Finally, aid will be granted through credit institutions and other financial institutions, as financial intermediaries.

Granting Authority: The aid will be administered by the Managing Authority of the Operational Programme Entrepreneurship, Competitiveness and Innovation (EPANEK).

Duration: aid may be granted under this measure as from its approval until 31 December 2020.

4.       Grants to the floriculture sector (approved on 05.05.2020)[7]

On 29 April 2020, Greece notified to the Commission under the Temporary Framework a EUR 10 million scheme to support companies active in the primary production of floricultural products affected by the coronavirus outbreak in the form of direct grants. Farmers active in the floriculture primary production sector are farmers active in the primary production of both cultivating flowering plants, potted flowering plants, garden plants, ornamental flowers and cut flowers and carrying out greenhouse cultivation for flowering plants, potted flowering plants, garden plants, ornamental flowers and cut flowers in Greece. Undertakings active in the processing and marketing of agricultural products as defined in Article 2(6) and 2(7) of the agricultural block exemption regulation are excluded from the scope of the measure. Aid may not be granted under the measure to undertakings that were already in difficulty within the meaning of the GBER or the Agricultural Block Exemption Regulation on 31 December 2019. The maximum aid amount per beneficiary under this measure shall not exceed EUR 100 000.

Granting Authority: The aid granting authority in Greece responsible for administering the measure is the “Payment and Control Agency for Guidance and Guarantee Community Aid’’ (OPEKEPE).

Duration: Aid may be granted under the measure as from its approval until 31 December 2020.
 

5.       Wage subsidies to self-employed (approved on 11.05.2020)[8]

On 6 May 2020, Greece notified to the Commission a scheme to provide a one-off payment of €800 per self-employed person, including self-employed managers of small companies that employ less than 20 employees in sectors severely affected by the coronavirus outbreak. The measure aims at partially compensating the eligible beneficiaries for the potential loss of income due to the coronavirus outbreak. The estimated budget of the measure is EUR 500 million.

Self-employed managers of small undertakings are required to declare that they maintain their personnel in continuous employment for the period during which they receive the aid.

The Commission found that the Greek scheme is in line with the conditions set out in the Temporary Framework. In particular, (i) the measure provides support similar to a wage subsidy that will partially compensate for the loss of income of self-employed individuals, including managers of small businesses, (ii) the aid is proportional as it is calculated with reference to the minimum national monthly wage in Greece, and (iii) the payment will be limited to the period 17 March – 30 April 2020.

Granting Authority: The Directorate General for Financial Services of the Ministry of Finance is responsible for administrating the measure. It will be supported in its functions by the Independent Authority for Public Revenues.

Duration: Aid may be granted under the measure no later than 31 December 2020.

6.       Which companies will be able to benefit from the measures?

The companies that are deemed eligible to benefit from the measures are those that are directly affected by the pandemic. The Minister of Finance issued a decision specifying the eligible businesses, which, inter alia, include companies active in the tourism, transport, catering, media and entertainment sectors as well as craft-type enterprises and retail businesses, as well as an extensive list that will be regularly updated including codes per field of commercial activity that is considered “directly affected” by the COVID-19 situation.

Aid may not be granted to undertakings that were already in difficulty on 31 December 2019 within the meaning of the GBER. 

Where an undertaking is active in several sector to which different maximum amounts apply in accordance with points 22(a) and 23(a) of the Temporary Framework, the granting authorities, by appropriate means such as separation of accounts, ensure that for each of these activities the relevant ceiling is respected and that the highest possible amount is not exceeded in total.

 

7.       What other types of aid measures have been adopted me the Greek Government, without prior clearance by the Commission?

The Greek Government through the implementation of its support package of financing tools, suspended, until 31 July 2020, payment of all taxes and levies, including payment of VAT and social security contributions for all businesses “directly affected” by the COVID-19 situation, irrespective of whether the undertaking benefiting from the suspension of payments was fully or partially operating or shut down during the foreseen period, but conditioned upon undertaking not to proceed with any deduction in personnel. Moreover, the possibility to suspend employment contracts for a period of up to 45 days (commencing on 20/04/2020) was foreseen, in which case the State would step in and provide employees put on furlough with a special compensation of EUR 800 covering also their social security contributions. Furthermore, a 40% discount on rents for undertakings that were directly affected by the COVID-19 situation was put in place. Finally, the VAT was reduced to 6% from 24% with regards to the sale of products that are necessary to prevent the spread of the virus, such as gloves, masks and personal hygiene products, as well as ethyl alcohol used in the manufacturing of such products.