European Commission approves €500 million Luxembourgish scheme to support companies in context of Russia’s invasion of Ukraine

The European Commission has approved a €500 million Luxembourgish guarantee scheme to support companies across sectors in the context of Russia’s invasion of Ukraine. The scheme was approved under the State aid Temporary Crisis Framework, adopted by the Commission on 23 March 2022, based on Article 107(3)(b) of the Treaty on the Functioning of the European Union (‘TFEU’), recognising that the EU economy is experiencing a serious disturbance.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This €500 million guarantee scheme will enable Luxembourg to mitigate the economic impact of Putin’s war in Ukraine and to further support companies across sectors affected by the current geopolitical crisis and the related sanctions. We continue to stand with Ukraine and its people. At the same time, we continue working closely with Member States to ensure that national support measures can be put in place in a timely, coordinated and effective way, while protecting the level playing field in the Single Market.”

The Luxembourgish support measure

Luxemburg notified to the Commission, under the Temporary Crisis Framework, a €500 million loan guarantee scheme to provide liquidity support to companies in the context of Russia’s invasion of Ukraine.

In light of the high degree of economic uncertainty caused by the current geopolitical situation, the scheme is aimed at ensuring that sufficient liquidity is available for the companies in need through the granting of a State guarantee on new loans to companies by enabling banks to continue lending to the real economy.

The measure will be open to companies of all sizes and sectors active in Luxemburg, with the exception of the financial sector.

Under the scheme, the beneficiaries will be entitled to receive new loans for up to six years that will be covered by a State guarantee not exceeding 90% of the loan amount.

The maximum loan amount per beneficiary that can be covered by the State guarantee is equal to either (i) 15% of the beneficiary’s average total annual turnover over a predefined time period; or (ii) 50% of the company’s energy costs incurred over a 12-month period.

The Commission found that the Luxembourgish scheme is in line with the conditions set out in the Temporary Crisis Framework. In particular, (i) the maturity of the loans cannot exceed six years; (ii) the annual interest rates on the loans respect the minimum levels set out in the Temporary Crisis Framework; and (iii) the guarantees will be granted by 31 December 2022 at the latest.

Furthermore, the public support will come subject to conditions to limit undue distortions of competition, including safeguards to ensure (i) a link between the amount of aid granted to companies and the scale of their economic activity; and (ii) that the advantages of the measure are passed on to the largest extent possible to the final beneficiaries via the financial intermediaries.

The Commission concluded that the Luxemburgish guarantee scheme is necessary, 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 Crisis Framework.

On this basis, the Commission approved the aid measure under EU State aid rules.