EU Approves German State Aid Package under the New Temporary Framework

The European Commission (“Commission”) approved the second State Aid Measure under the New Temporary Framework, as a response to the COVID-19 outbreak.  COVID-19 crisis is delivering a “major shock” to EU economies and, as Von der Layen previously promised, the Commission will give a leg up to the Member States to weather the storm.  In that regard, on March 22, 2020, the Commission promptly cleared, within 48 hours of the application being submitted, a State aid package by German Government, implemented through the German promotional bank Kreditanstalt für Wiederaufbau (“KfW”).

Not to be found wanting, the German government has gone all out on this front.  The adopted measures are designed to greatly ease access to loans provided by the State bank KfW. “This is the bazooka, and we will use it to do whatever it takes,” Mr Scholz stated and “no upper limit on the number of loans KfW can issue” he added.

Covering guarantees on loans limited in size and maturity, the measures include:

  • A loan program covering up to 90% of the loan risk for companies of all sizes. Qualifying loans may have a maturity of up to 5 years and a value up to EUR 1 billion per company, depending on the company’s liquidity needs.
  • A loan program in which the KfW participates together with private banks to provide larger loans as a consortium. For this scheme, the risk assumed by the State may cover up to 80% of a specific loan but no more than 50% of a company’s total debt.

 

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