EU temporarily loosens state subsidy regulations

Special Report:Global Financial Crisis

BRUSSELS, Dec. 17 (Chinese media) -- The European Commission said here on Wednesday that it adopted temporary framework for member states to allow them to grant or lend more money to companies to tackle effects of credit squeeze on real economy.

Under the temporary rules, member states will be able to grant without notification of individual cases subsidized loans, loan guarantees at a reduced premium, risk capital for small and medium enterprises (SMEs) and direct aids of up to 500,000 euros, much higher than the original 200,000 euros.

The new rules stipulate risk capital aid up to 2.5 million euro per SME per year, instead of the current 1.5 million euros, in cases where at least 30 percent rather than the current 50 percent of the investment cost comes from private investors.

All measures are limited until the end of 2010 and subject to conditions, said the commission, adding that based on member states' reports, "the commission will evaluate whether the measures should be maintained beyond 2010, depending on whether the crisis continues."

The commission said that the new measure are to facilitate the tackling of the current economic difficulties to ensure sufficient bank lending to companies, to allow companies with liquidity problems to benefit from temporary relief through a limited grant, and to encourage companies to continue investing into a sustainable future.

"We must fight the crisis, not each other. State aid must be targeted at allowing companies, especially SMEs, to overcome financial problems arising from the current credit squeeze without worsening the situation for other companies, thereby aggravating the crisis," said Competition Commissioner Neelie Kroes.

"Together with the existing possibilities to support smart investment in sustainable growth, the new measures will give new opportunities to member states to bring the economy back on the right track," said Kroes.

The commission expects the financial markets, and hence the provision of lending to businesses, to get back to normal in the foreseeable future.