Brussels nods on HUF 550 billion Hungarian state aid

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The European Commission has approved a EUR 1.55 billion (cc. HUF 550 billion) Hungarian aid scheme to support the Hungarian economy in the context of 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.
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“The €1.55 billion scheme will enable Hungary to provide public guarantees on loans to companies affected by the coronavirus outbreak. The measures will help businesses cover their immediate investment and working capital needs, and support them to continue their activities and maintain employment during and after the crisis," commented Executive Vice-President Margrethe Vestager, in charge of competition policy.

"We continue to work closely with all Member States to ensure that national support measures can be put in place in a timely, coordinated and effective way, in line with EU rules," she added.

Hungary notified to the Commission under the Temporary Framework a €1.55 billion scheme (about HUF 550 billion) to support companies affected by the coronavirus outbreak. The scheme consists of two complementary measures that will be managed and implemented by two separate entities:

  • The semi State-owned Garantiqa Credit Guarantee Company Ltd. will provide guarantees on loans up to a maximum of €14 million (cc. HUF 5 billion) per company;
  • The State-owned MFB Ltd. (Hungarian Development Bank) will provide guarantees for loans in excess of that amount up to a maximum of €28 million (cc. HUF 10 billion) per company.

Under the scheme, the public support provided by Garantiqa will take the form of State guarantees on new and existing investment and working capital loans. The support provided by the Hungarian Development Bank will take the form of State guarantees on new investment and working capital loans. The guarantees will be channelled through credit institutions.

The scheme aims at providing liquidity to those companies which are most severely affected by the economic impact of the coronavirus outbreak, helping them to continue their activities, start investments and maintain employment during and after the outbreak.

The scheme will be open to micro, small and medium-sized enterprises (SMEs) and large companies.

The Commission found that the Hungarian measures are in line with the conditions set out in the Temporary Framework. In particular: (i) the underlying loan amount per company is limited to what is needed to cover its liquidity needs for the foreseeable future, (ii) the guarantees will only be provided until the end of this year, (iii) the guarantees are limited to a maximum of six years, (iv) the guarantee premiums do not exceed the levels foreseen by the Temporary Framework, and (v) the scheme contains adequate safeguards to ensure that the aid is effectively channelled by the credit institutions to the beneficiaries in need.

The Commission concluded that the measures arenecessary, 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 measures under EU State aid rules.

Cover photo: Getty Images

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