The EU pledges to do “whatever is necessary” to support Europe’s economy. What help for small businesses?

European companies, especially small businesses, are being severely affected by the Coronavirus. In addition to the hospitality and travel sectors, countless other small businesses have been impacted, including sharing economy businesses and Europe’s live event industry. Reduced demand and cancelled events are impacting these businesses, their employees, and local economies like never before.

In the European Union, health-related measures tend to fall under national legislation. However, governments’ aid to national businesses has to abide by the EU’s strict state aid rules. 

Last week, the European Commission approved a temporary, flexible state aid framework allowing governments to provide aid amid the virus outbreak. Countries are now allowed to provide direct grants, selective tax advantages and advance payments up to €800,000 per company. States may also provide guarantees for bank loans and subsidized loans to “help businesses cover immediate working capital and investment needs.” Governments are also allowed to inject new money into banks if the funds are channeled to support small and medium-sized enterprises (SMEs).

European governments are acting quickly to provide support to small businesses. Here is an overview of some key measures:

Taxes:

Small companies have been allowed to delay tax payments in France, Germany, Italy, Spain, Portugal, Sweden, Austria and elsewhere. In Sweden, companies that have paid tax for the first part of 2020 can even have those amounts paid back to them by the Swedish Tax Agency.

Loans:

Germany has pledged unlimited liquidity assistance to companies that need cash, in the form of loans provided by the state development bank. In France, small businesses can ask for a loan directly from state-backed investor Bpifrance or request for its backing as a guarantor to get a loan from a regular bank. In Italy, the state lender is offering liquidity assistance for SMEs. In Spain, the state-backed lender Instituto de Credito Oficial has been given extra means to hand out loans to companies and freelancers in the most affected sectors. Ireland is providing several types of loans, from small loans for microenterprises up to €1,5m. Other EU countries, such as Portugal and Sweden, are also offering loans.

Unemployment and reduced hours measures:

A number of governments are providing support for companies having to reduce the hours worked by their employees. A new German law allows state support for companies that have implemented reduced hours. French companies that experience sharp declines in activities can request that the government reimburse part of employees’ salaries. Portugal is encouraging employers to keep employment contracts by taking on most of the cost of a worker’s salary, even if that employee is inactive. In Sweden the government will, in some cases, cover three quarters of the costs. The government will also assume sick pay responsibility for two months. Danish employers can get reimbursed for wages and sickness benefits for when an employee is sick. Companies can temporarily reduce the work hours of employees and get compensation for some of their pay. 

Many entrepreneurs are self-employed and subject to fewer protections. Ireland has introduced a flat rate pay of €203 per week for six weeks for the self-employed who have lost business and those who have lost employment due to the virus.

For more information, check out Sifted’s guide to “support measures for startups affected by coronavirus”.

Despite these measures the broader economic impact is expected to be severe for Europe’s economy. Last Friday, European Commission President Ursula von der Leyen pledged to do “whatever is necessary to support Europeans and the European economy”. For the first time ever, the Commission triggered the “general escape clause” of the eurozone’s rules on budgetary discipline, allowing governments to fund their economies “as much as they need.” EU Finance Ministers approved that decision yesterday.