Under the temporary framework for state aid measures to support the economy in the current context of the COVID-19 outbreak, the European Commission has authorized €40 billion in Italian state aid for large affected companies. This aid involves the implementation of recapitalisation instruments, in particular equity, and hybrid capital instruments (convertible bonds and subordinated debt).
Before authorising this State aid for large Italian companies facing a sharp decline in turnover in 2020, the European Commission had already authorised Italian State aid for small and medium-sized enterprises on 31 July.
Within the framework of the temporary state aid framework, to be eligible, companies must, among other criteria, be considered strategic for the economy and for the labour markets.
The temporary framework, as amended on 3 April, 8 May and 29 June 2020, provides that 11 types of aid may be granted by Member States to counter the current health crisis.
Among the types of aid allowed are :
– aid in the form of direct grants, equity injections, selective tax benefits and repayable advances. This aid can be up to €100,000 for businesses in the primary agricultural sector, up to €120,000 for businesses in the fisheries and aquaculture sector and up to €800,000 for businesses in all other sectors, to enable them to meet their urgent liquidity needs.
– Aid in the form of guarantees on loans taken out by businesses can cover up to 90% of risks.
– Aid in the form of subsidised public loans to businesses (senior and subordinated debt) with reduced interest rates.
– Aid in the form of guarantees for banks that channel state aid to the real economy.
– Public short-term export credit insurance capacity
– support for coronavirus-related research and development (R&D)
– support for construction and expansion of testing facilities
– support for the manufacture of products needed to deal with the coronavirus pandemic in the form of direct subsidies, tax benefits, repayable advances and guarantees to cover losses.
– Targeted support in the form of deferral of tax payments and/or suspension of social security contributions for sectors, regions or types of enterprises hardest hit by the pandemic
– Targeted support in the form of wage subsidies for employees in companies in sectors or regions that are suffering most from the coronavirus pandemic and who would otherwise have been forced to lay off staff.
– Targeted recapitalisation support for non-financial enterprises, if there is no other appropriate solution.
In the present case, the Commission concluded on 17 September 2020 that the scheme notified by Italy is in line with the conditions set out in the Temporary Framework. In particular, with respect to recapitalisation measures, (i) the support is available to companies if it is needed to maintain operations, no other appropriate solution is available, and it is in the common interest to intervene; (ii) support is limited to the amount necessary to ensure the viability of beneficiaries and does not go beyond restoring their capital structure before the coronavirus outbreak; (iii) the scheme provides an adequate remuneration for the State; (iv) the conditions of the measures incentivise beneficiaries and/or their owners to repay the support as early as possible (inter alia through progressive increases in remuneration, a dividend ban as well as a cap on the remuneration of and a ban of bonus payments to management); (v) safeguards are in place to make sure that beneficiaries do not unduly benefit from the recapitalisation aid by the State to the detriment of fair competition in the internal markets, such as an acquisition ban to avoid aggressive commercial expansion; and (vi) aid to a company above the threshold of €250 million has to be notified separately for individual assessment.
With respect to aid in the form of subordinated debt instruments, (i) aid will not exceed the relevant limits on turnover and wage bill of the beneficiaries set out in the Temporary Framework and (ii) support can only be granted until the end of 2020.
Finally, only companies that were not considered to be in difficulty already on 31 December 2019 are eligible for aid under this scheme.
The Commission concluded that the scheme is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework.
On this basis, the Commission approved the measure under EU State aid rules.