Abstract:

The spread of the coronavirus hit the global economy unexpectedly and with great force. In response, countries around the world implemented several containment measures to halt the pandemic. These had a stifling effect on economic activities in almost all sectors. Many so far healthy undertakings had to (and still have to) deal with the looming lack of liquidity. In order to counter the damage inflicted on undertakings and to perverse the continuity of economic activity during and after the coronavirus pandemic, public authorities were forced to launch simultaneously various types of support measures for  entrepreneurs. Objective: As the extraordinary times call for greater activity on the part of the state, the question is how freely can EU member states design their interventions and what support measures for entrepreneurs are utilised to deal with the effects of the COVID-19. The problem is vital for the avoidance of harmful subsidy races among EU member states and preserving a level playing field in the EU internal market. Research design & methods: State activity in the form of providing support for enterpreneurs is discussed  as a trade-off between the need to mitigate the disruptive impact of the coronavirus pandemic on the economy and the need to maintain a level playing field for all enterprises in the EU. Considerations are based on   literature review, the analysis of relevant legal provisions and guidelines as well as state aid cases related to coronavirus. Findings and Implications: State aid has always been thought as the ‘second best’ option, meaning that member states may resort to state aid only when other less distortive policy measures, such as general and regulatory measures, cannot be applied instead to achieve a given objective. For instance, deferrals of payments of taxes and social security contributions could be a valuable tool to reduce the liquidity constrains of undertakings. When applied generally they fall outside state aid rules. Member states can also grant compensation for damage suffered due to and directly caused by the coronavirus outbreak, as it qualifies as an exceptional occurrence under Article 107(2)(b) TFUE,  for undertakings particularly impacted by the pandemic, such as transport, tourism or hospitality. However, operating aid, which now is flowing in a wide stream as a response to the coronavirus crisis can only be regarded as compatible with the EU internal market when is granted on a temporary basis and is proportional. Contribution/Value added: The article contribution lies in providing a better understanding of the rationale behind the EU state aid control and state aid admissibility in the context of the coronavirus outbreak.