European Commission approves €5.2 billion Czech guarantee scheme for loans to large exporting companies affected by coronavirus outbreak

The European Commission has approved an approximately €5.2 billion (CZK 142 billion) Czech guarantee scheme for large companies with export activities affected by the coronavirus outbreak. The scheme was approved under the State aid Temporary Framework adopted by the Commission on 19 March 2020, as amended on 3 April 2020.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This Czech guarantee scheme of about €5.2 billion will support companies with a certain amount of export activities in these difficult times. The measure will help these businesses continue their activity during and after the coronavirus outbreak. We continue to work in close cooperation with Member States to find workable solutions to mitigate the economic impact of the coronavirus outbreak, in line with EU rules.”

The Czech support measure

Czechia notified to the Commission under the Temporary Framework an approximately €5.2 billion (CZK 142 billion) guarantee scheme to support lending to large exporting companies affected by the coronavirus outbreak. The support, in the form of State guarantees on loans, will be accessible to large companies whose exports represent at least 20% of their yearly sales revenue.

The scheme aims at limiting the risk associated with issuing loans to those exporting companies that are most severely affected by the economic impact of the coronavirus outbreak, thus ensuring the continuation of their activities.

The Commission found that the Czech measure is in line with the conditions set out in the Temporary Framework. In particular, (i) it covers guarantees on investment or working capital loans with a limited maturity and size; (ii) it is limited in time; (iii) it limits the risk taken by the State to a maximum of 80%; (iii) it provides for adequate remuneration of the guarantees; and (iv) it contains safeguards to ensure that the aid is effectively channelled by the banks or other financial institutions to the beneficiaries in need.

The scheme will be managed by the Czech export credit agency EGAP. The guarantees will support lending to those companies, but will not take the form of export aid contingent on export activities as it is not tied to concrete export contracts. On the contrary, it finances the general activity of the beneficiaries by facilitating their access to liquidity in the form of working capital loans and investment loans.

The Commission concluded that the Czech guarantee scheme for exporting companies isnecessary, 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.

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