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Brussels, 23rd April 2009

State aid: Commission authorises temporary Latvian guarantee scheme to boost real economy

The European Commission has authorised, under EC Treaty state aid rules, a Latvian scheme aimed at providing relief to companies encountering financing difficulties as a result of the credit crunch in the current economic crisis. The scheme allows the granting of subsidised guarantees for initial investment and working capital loans concluded by 31 December 2009. It meets the conditions of the Commission’s Temporary Framework for state aid measures to support access to finance during the crisis (see IP/08/1993) because it is limited in time, respects the relevant thresholds and applies only to companies that were not in difficulty on 1 July 2008. It is therefore compatible with Article 87(3)(b) of the EC that allows aid to remedy a serious disturbance in the economy of a Member State.

Competition Commissioner Neelie Kroes said "The Latvian guarantee scheme is an effective way of encouraging business investment and economic recovery, without unduly distorting competition."

The Latvian authorities designed the scheme on the basis of the rules laid down in the Commission's Temporary Framework on state aid to the real economy during the crisis (see IP/08/1993), as amended on 25 February 2009, and in particular the conditions for aid in the form of subsidised guarantees.

The reduction of the guarantee fee can be applied during a period of up to two years for loan guarantees contracted no later than 31 December 2009. Where the duration of the underlying loan exceeds two years, the safe-harbour premiums set out in the Annex to the Temporary Framework, as amended, may be applied for the remaining period of the guarantee. The maximum duration of guarantees granted under the scheme is limited to three years for working capital loans and to ten years for initial investment loans. The scheme does not apply to firms that were already in difficulty on 1 July 2008 (i.e. before the credit crunch).

In view of the importance of the scheme for the overall Latvian economy, the Commission considered that the scheme can be approved under Article 87(3)(b) of the EC Treaty. The Latvian authorities demonstrated that the scheme is necessary, proportional and appropriate to remedy a serious disturbance in the Latvian economy.

The decision will be published in the State Aid Register on DG Competition’s website, under the reference number N 139/2009. The latest decisions on state aid published in the Official Journal and on the website are listed in the electronic newsletter State aid Weekly e-News.

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