EU wants to extend looser state aid rules for virus-hit companies to mid-2022

By Foo Yun Chee

BRUSSELS (Reuters) -The European Commission on Thursday proposed extending looser state aid rules for virus-hit companies for six months to June 2022 in a bid to slowly wean them off the billions of euros provided by governments across the European Union.

The EU executive, tasked with ensuring a level playing field in the 27-country bloc, also proposed two new measures to encourage investment support and solvency support for a limited time to help Europe rebound from the impact of the COVID-19 pandemic.

The so-called Temporary Framework, adopted in March last year and due to expire at the end of this year, has allowed EU countries to pump in more than 3 trillion euros to thousands of companies across the bloc.

"We need to be aware of disparities across member states and the need to avoid cliff-edge effects when withdrawing public support," Commission Vice-President Margrethe Vestager said in a statement.

"We are therefore proposing a progressive phase-out of crisis support measures to enable member states and industry to adjust, accompanied by measures to kick-start and crowd-in private investment in the recovery phase," she said.

While the proposed investment support measures are aimed at a wide group of beneficiaries and should be limited in size, the solvency support measure is targeted at small- and medium-sized companies which typically rely on bank loan financing.

A final decision will be taken once EU countries provide feedback to the proposals.

(Reporting by Foo Yun Chee; Editing by Kirsten Donovan)