European Commission approves €1.74 billion Danish scheme to support mink farmers and related businesses in context of coronavirus outbreak

New Delhi: The European Commission has approved under EU State aid rules, an approximately €1.74 billion (DKK 13 billion) Danish scheme to compensate mink farmers and mink-related businesses for measures taken in the context of the coronavirus outbreak. This follows the receipt of a complete notification from Denmark on 30 March 2021.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The Danish government took far reaching measures to prevent the spread of new coronavirus variants and new outbreaks among mink, which presented a serious threat to the health of citizens in Denmark and beyond. The DKK 13 billion scheme approved today will enable Denmark to compensate mink farmers and related businesses for damages incurred in this context. We continue to work in close cooperation with Member States to ensure that national support measures can be put in place as quickly and effectively as possible, in line with EU rules.”

The Danish support measures

Following the detection and rapid expansion of several mutated variants of the coronavirus among mink in Denmark, at the beginning of November 2020, the Danish authorities announced their intention of culling all mink in Denmark. In order to avoid a similar situation developing in 2021, the Government also issued a ban on the keeping of minks until beginning 2022.

On 30 March 2021, Denmark sent a complete notification to the Commission on a Danish scheme to compensate mink farmers and mink-related businesses in this context, given the significant economic impact and loss of employment caused by these extraordinary measures. The scheme consists of two measures:

The first measure, with a budget of approximately €1.2 billion (DKK 9 billion), will compensate mink farmers for the temporary ban on mink farming;
The second measure, with a budget of approximately €538 million (DKK 4 billion), will support mink farmers and mink-related businesses who are willing to give up their production capacity to the State.
Support under both measures will take the form of direct grants.

Compensation to mink farmers for temporary ban

The direct grants to compensate for the ban on mink farming will cover all fixed costs for those mink farmers that will temporarily close production until the ban on mink farming is lifted on 1 January 2022. This period may be extended by one year.

The Commission assessed the measure under Article 107(2)(b) of the Treaty on the Functioning of the European (TFEU), which enables the Commission to approve State aid measures granted by Member States to compensate specific companies or specific sectors for the damage directly caused by exceptional occurrences.

The Commission considers that the coronavirus outbreak qualifies as such an exceptional occurrence, as it is an extraordinary, unforeseeable event having a significant economic impact. As a result, exceptional interventions by Member States to avoid the emergence of new coronavirus variants and prevent new outbreaks, such as the temporary ban on mink farming, and the compensation for the damages linked to these interventions are justified.

The Commission found that the Danish measure will compensate the damages suffered by mink farmers that are directly linked to the coronavirus outbreak, since the ban on the keeping of mink until beginning 2022 can be considered as a damage directly linked to the exceptional occurrence.

The Commission also found that the measure is proportionate, as an independent valuation commission, appointed by the Danish Veterinary and Food Administration and directly reporting to them, will make an assessment of necessary fixed costs and maintenance costs on the specific farms during the shutdown period, including by carrying out on-site inspections. This will make sure that the amount of compensation only covers the actual damage suffered by the farmers.

Support to mink farmers and related businesses who will give up their production capacity to the State

This scheme will compensate mink farmers who will give up their production capacity to the Danish State for the long-term, with a view to restructuring an industry prone to the appearance of new coronavirus variants that could threaten to prolong the current crisis and the disturbance to the Danish economy. It will be calculated based on two overall loss items of mink farmers: i) their loss of income for a ten year budget period; and ii) the residual value of the mink farmer’s capital stock (buildings, machinery, etc.).

Mink-related businesses that significantly rely on mink production will also be eligible for support under this measure (specialised feed centers and providers, skinning factories, the auctioneer Kopenhagen Fur, etc). A valuation commission will assess that they fulfill a number of conditions, namely that at least 50% of the businesses’ turnover in the period 2017-2019 is related to the Danish mink industry and that the business cannot directly convert the production into other activities. The aid will equal the value of the part of the business that cannot directly convert its production into other activities.

A precondition for receiving support under this measure is that the State takes over the assets (all production equipment, stables, machinery, etc.), which will no longer be available to the farmers or to related businesses, respectively.

The Commission assessed the measure under EU State aid rules, and in particular Article 107(3)(b) TFEU, which enables the Commission to approve State aid measures implemented by Member States to remedy a serious disturbance in their economy. The Commission found that the Danish scheme is in line the principles set out in the EU Treaty and is well targeted to remedy to a serious disturbance to the Danish economy.

The Commission found that the Danish measure will offer support that is directly linked to the need to remedy a serious disturbance in the economy of Denmark and safeguard the European and global efforts towards the end of the pandemic also thanks to an effective vaccine, by restructuring an industry that is prone to the appearance of new coronavirus variants. It also found that the measure is proportionate, based on a clear method of calculation and safeguards to ensure that the aid does not exceed what is necessary. In particular, the calculations of the aid are tailored to the mink farming sector and related businesses, based on representative reference data, individual appraisals and acceptable valuation and depreciation methods.

The Commission therefore concluded that the measure will contribute to managing the economic impact of the coronavirus in Denmark. It 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 general principles set out in the Temporary Framework.

On this basis, the Commission concluded that the two Danish measures are in line with EU State aid rules.

 

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