26 January 2021
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Germany`s New Umbrella Scheme – The Largest Aid Package Gets Even Larger

The European Commission (“Commission”) approved the EUR 12 billion German umbrella scheme to support companies adversely affected by the Covid-19 outbreak, which wreaked havoc on the economy during lockdowns last year.

The Commission, which has a crucial role in preventing creation of further market asymmetries stemming from State aid, issued a statement explaining that the German scheme was a “proportionate” response and in line with the EU state aid rules. This scheme is approved under Article 107(2)(b) of the Treaty on the Functioning of the European Union (“TFEU”) which foresees compensating companies for damage directly caused by exceptional events. By design, this measure was supposed to allow the Member States to use the full flexibility foreseen under State aid rules, to tray and mend their already damaged economic well-being.

The Commission’s Vice-President Margrethe Vestager, in charge of competition policy, said: This €12 billion scheme will enable Germany to compensate businesses of all sectors for the damages suffered due to restrictive measures taken to contain the coronavirus outbreak. It complements already approved schemes enabling support of up to €4 million per company as part of the Novemberhilfe package.”  She further underlined the importance of coordinated action to find efficient solutions to support companies in these difficult times, in line with EU rules.

Now, moving on to the main part of the statement – the umbrella schemе.

German umbrella scheme – Novemberhilfe package

The package includes three umbrella schemes:

  1. up to EUR 1 million per undertaking under an umbrella scheme on small grants (of up to EUR 800,000, initially) approved by the Commission on March 24, 2020, combined with de minimis support of up to EUR 200,000;
  2. an additional EUR 3 million per undertaking approved by the Commission in an uncovered fixed costs compensation umbrella scheme on November 23, 2020; and
  3. the latest scheme approved on January 21, 2021.

Note that under the latest scheme, companies from all sectors will be entitled to compensation in the form of direct grants for damages incurred during the lockdown periods imposed by the German government in March/April and November/December 2020.  The compensation will cover:

  1. up to 100% of actual damage incurred during the lockdown periods, or
  2. 75 % of the turnover in the reference months of November and December 2019, whichever amount is lower.

If someone were to ask what all the fuss is about with this stimulus package, this article provides a brief explanation. Adequate financial support during crises can make or break a country`s economy.  For this reason, any and every measure should be given the attention it deserves.

However, if you haven’t followed our posts, do read this article, and please note that Germany alone has been allocated more than half of the coronavirus State aid approved. Could one argue that Germany, as the largest economy, gets an unfair advantage in the EU’s single market?