The European Commission found the creation of a €25 billion Pan-European Guarantee Fund managed by the European Investment Bank (EIB) to support companies affected by the coronavirus outbreak to be in line with EU State aid rules.
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The Fund is expected to mobilise up to €200 billion of additional financing to support mainly small and medium-size enterprises (SMEs) affected by the outbreak in the 21 participating Member States.
In April 2020, the European Council endorsed the establishment of a Pan-European Guarantee Fund under the management of the European Investment Bank Group, as part of the overall EU response to the coronavirus outbreak. It is one of the three safety nets agreed by the European Council to mitigate the economic impact on workers, businesses and countries.
The Fund will provide guarantees on debt instruments (such as loans). It aims at addressing in a coordinated manner the financing needs of European companies (mainly SMEs) that are expected to be viable in the long-term, but are facing difficulties in the current crisis across Europe. The EIB and the European Investment Fund (‘EIF') expect up to €200 billion of additional financing to be mobilised thanks to the Fund.
All Member States have the option to participate in the Fund. So far, 21 Member States decided to participate. The participating Member States are Austria, Belgium, Bulgaria, Croatia, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Lithuania, Luxemburg, Malta, the Netherlands, Poland, Portugal, Slovakia, Spain and Sweden.
The Fund's operations will be jointly guaranteed by the participating Member States from their national budgets. The contribution to the Fund by each participating Member State is proportionate to their contribution to the EIB capital.
These contributions, which amount to €25 billion in total, take the form of guarantees that will cover part of losses incurred by the beneficiaries in the operations supported by the Fund. By pooling credit risk across all of the participating Member States, the overall impact of the Fund can be maximised, whilst the average cost of the Fund will be significantly reduced compared to national schemes.
The Fund will be administered by the EIB and the EIF. The participating Member States will take part in the governance of the Fund through the so-called Contributors Committee, which will decide on the use of guarantee. It is set up to be temporary in nature and will be able to guarantee loans provided until 31 December 2021.
On 19 March 2020, the Commission has adopted a State aid Temporary Framework to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework will be in place until the end of June 2021. ■