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Law360 (May 11, 2020, 4:10 PM EDT) -- A French government plan to provide financial guarantees to help small- to mid-size companies continue exporting amid the coronavirus outbreak was cleared by the European Commission on Monday.
The bloc's competition watchdog said France's decision to create the guarantee scheme for certain businesses with export activities that are affected by COVID-19 don't run afoul of EU restrictions on state aid, which are meant to keep individual countries from unfairly subsidizing their private sectors.
The French plan is expected to mobilize €200 million ($216.2 million) to guarantee help to exporters.
"The measure will help these businesses continue their activity during the outbreak," Margrethe Vestager, the EU's competition chief, said in a Monday statement. "We continue working closely with member states to ensure that national support measures can be put in place in a coordinated and effective manner, in line with EU rules."
The commission cited several reasons for the approval, saying the French scheme covers guarantees with a limited maturity and size, the guarantees will only be provided until the end of this year, it limits the risk taken by the state to a maximum of 90%, the guarantees can be offered to all exporting companies in France, the guarantee mechanism ensures risk sharing among its users and fee premiums provide a sufficient remuneration for the French state.
EU officials' blessing to the French effort is the latest in a string of commission state aid approvals aimed at shoring up European economies that severely contracted during pandemic-driven shutdowns. The approvals generally fall under temporary state aid rules to deal with the pandemic. That framework expires at the end of December.
The commission in late April approved measures by 10 member countries totaling €6.3 billion ($6.82 billion) to help local businesses affected by the coronavirus pandemic, including two multibillion-dollar aid packages from Finland and Slovenia.
France had notified the commission of the plan to support activities of small- and mid-size exporting companies affected by the coronavirus outbreak. The support will be accessible to all French exporting companies with an annual turnover below €1.5 billion ($1.62 billion).
According to the EU. the plan "aims at limiting the risk associated with issuing financing guarantees to those exporting companies that are most severely affected by the economic impact of the coronavirus outbreak, thus ensuring the continuation of their activities."
Under its rules, the EU can approve state aid measures by member states to remedy a serious disturbance in their economy.
The EU case is number SA.57219 in the state aid register.
--Additional reporting by Sarah Martinson. Editing by Gemma Horowitz.
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