Matt Atlas

EU Must Further Relax State Aid Rules, Say Austria, Denmark, Czech Republic

EU regulators should loosen state aid rules further to make it easier for companies hit by the COVID-19 pandemic to receive support, the governments of Austria, Denmark and the Czech Republic said on Thursday.

The European Commission, the EU competition enforcer, relaxed its rules in March 2020 but the three member states said limits still existed on the levels of government aid, particularly in the case of direct grants.

“European businesses will face severe economic consequences well into 2021,” the trio said in an open letter published in the Financial Times. “Yet each passing month raises the amount of COVID aid that businesses have received, bringing them ever closer to the state aid limit ceilings.

“To end this uncertainty, we suggest that the ceilings for direct grants and uncovered fixed costs be raised significantly,” they said.

The letter was written by Denmark’s acting minister for industry, businesses and financial affairs, Dan Joergensen, along with Karel Havlicek, deputy prime minister of the Czech Republic, and Austrian Finance Minister Gernot Bluemel.

EU competition commissioner Margrethe Vestager is currently seeking feedback from member countries to extend the looser rules to the end of 2021 and allow more funding to businesses crippled by the pandemic.

As COVID-19 cases spiked across Europe in October, the Commission said its “temporary framework” allowing states to support businesses would be extended by six months until June 30, 2021. The period for recapitalisation measures has been prolonged by six months until September 30, 2021.

States can also provide support to contribute towards the fixed costs of companies facing a decline in turnover, with a maximum payment of 3 million euros.

The Commission adopted its flexible approach to state aid on March 19, 2020 as the coronavirus first swept through the continent, pitching it into a deep recession.