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Law360 (April 9, 2020, 8:29 PM EDT ) The European Commission announced a proposal Thursday to enable member states to provide recapitalizations to companies severely affected by the COVID-19 pandemic, a move that would further expand the scope of the commission's temporary framework permitting aid to combat the novel coronavirus.
The commission, the executive branch of the European Union, said it will make the tweak by next week, building on measures enacted in March and last week, including the expansion of aid to support research and development, testing-facility construction and health care products manufacturing.
Margrethe Vestager, the commission's executive vice president in charge of competition, said in a statement that while the body prioritizes the health of all European citizens, there are mounting concerns that emergency measures put in place to contain COVID-19 are affecting many European companies' ability to produce goods or supply services.
The public health precautions have also caused a significant drop in demand, and providing recapitalizations to companies in need could reduce the risk to the EU economy, the commission said.
The latest tweaked framework would recapitalize companies only "when necessary and appropriate," Vestager added.
"We will make sure that taxpayers are sufficiently remunerated for their investment, and companies that receive capital support are subject to controls and governance provisions that limit possible distortions to competition in the single market. We continue working with member states to make sure that the European economy can weather this storm, and bounce back even stronger."
The announcement noted that public support for the recapitalization of some companies "can be highly distortive for competition" in the EU single market. Therefore, the commission is proposing numerous safeguards on the conditions for granting state aid.
Bloc members would also be mandated to develop "an exit strategy" — specifically for large businesses "with the goal of making sure that they can return to viability without further need for state support when the economy has stabilized," according to the announcement.
As of Thursday, the World Health Organization has counted more than 1.43 million confirmed cases of COVID-19, including over 85,500 deaths globally. In Europe, the WHO reported over 139,400 cases and more than 17,600 deaths in Italy, over 81,000 cases and roughly 10,850 deaths in France, and over 108,200 cases and more than 2,100 deaths in Germany.
--Additional reporting by Bryan Koenig. Editing by Orlando Lorenzo.
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