European State Aid Law25.03.2020 Newsletter

Corona Crisis: Federal Government and Federal State Support Programs

(Last Update: 22 June 2020)

Below, we would like to give you an overview of economic support programs of the Federal Government and the federal states for bridging the corona crisis. Not all of the announced programs have already been implemented.

Up-to-date information on all topics can be found on the website of the German Federal Ministry for Economic Affairs and Energy [Bundeswirtschaftsministerium, BMWi].

1. EU Commission

State subsidies are generally subject to the EU state aid regime. On 19 March 2020 the European Commission (EU COM) adopted a "Temporary Framework" (details) which it extended on 8 May 2020 by the possibilities of recapitalisation and debt measures (details). The new regulation is intended to enable the EU member states to grant state subsidies to enterprises quickly and without complication under certain conditions.

Aid granted before 31 December 2020 and falling under the “Temporary Framework” will be deemed permissible by the EU Commission (Article 107 (3b) TFEU). These include the following support measures:

  • Aid schemes providing direct grants or tax advantages of up to EUR 800,000 per enterprise.
  • Subsidized guarantees for new bank loans (e.g. through a reduced commission on the guarantee). This applies to SMEs, but also to other enterprises.
  • Subsidized bank loans (because the interest rate is reduced), with different interest rates for SMEs and other enterprises.
  • Enabling tax deferrals and suspension of social security contributions for specific sectors, regions or types of companies
  • Wage subsidies for workers in severely affected industries or regions to prevent redundancies.

The EU COM has already made it clear that the banks participating in such state aid schemes do not receive the state aid, as they "channel" the relevant advantages on to recipients.

This framework shall apply to firms that have experienced economic difficulty after 31 December 2019 (and not the rescue and restructuring aid guidelines of the EU COM of 2014).

The EU COM has also clarified that separate state aid is conceivable for certain sectors (e.g. passenger aviation).

On 22 March 2020 the EU Commission approved the first German support measures for improved credit conditions on the basis of the Temporary Framework (press release of the EU Commission). These measures have been implemented in the "KfW Special Programme 2020" (press release), which we present to you under 2.1. The EU COM approved to an extension of the German measures on 02 April 2020 (press release), as well as on 11 April 2020 (press release) and on 14 April 2020 (press release).


2.Recapitalisation and debt measures: Wirtschaftsstabilisierungsfonds (WSF)

On 08 May 2020 the EU Commission extended the Temporary Framework. The member states are now allowed to strengthen the equity base of companies in crisis due to Corona by means of recapitalisation and debt measures (including subordinated debt, hybrid bonds, profit participation rights, dormant holdings, convertible bonds, share takeovers). Thanks to the expansion, the BMWi expects the WSF to be approved by the EU Commission shortly. WSF will soon be able to take up its work; negotiations are on the home straight (press release).

The WSF provides EUR 400 billion state guarantees for liabilities, EUR 100 billion for direct state investments and EUR 100 billion for refinancing KfW's special programmes. Eligible to apply are enterprises in the real economy whose existence-threatening situation would have a considerable impact on the business location or the labour market in Germany. These enterprises must have fulfilled at least two of the following three criteria in the last two financial years before 1 January 2020:

  • A balance sheet total of more than EUR 43 million.
  • Sales revenues of more than EUR 50 million.
  • More than 249 employees on annual average.

Exceptions may be made on a case-by-case basis in respect of state guarantees and recapitalisation measures for companies which are active in one of the sectors listed in Section 55 of the Foreign Trade and Payments Regulation (Außenwirtschaftsverordnung) or which are of a comparable importance for the security or the economy of Germany. In individual cases, recapitalisation measures may also be considered for companies which have been valued by private investors with an enterprise value of at least EUR 50 million in at least one completed financing round since 1 January 2017.

In addition, the companies must not have access to any other financing options and must not have met the EU definition of "a company in difficulty" by 31 December 2019. Further information and shortly the application form can be found here.


3. Measures at Federal Level

Together with the Federal Ministry of Economics and the Federal Ministry of Labour [Bundesarbeitsministerium], the Federal Ministry of Finance [Bundesfinanzministerium] is supporting the economy with a billion-euro aid package. In addition to the adjustment of the regulations on short-time work (for more information, click here), the temporary suspension of the obligation to file for insolvency until 30 September 2020 (for more information, click here) and tax relief (for more information, click here), in the event that companies and businesses experience financial difficulties in connection with the corona crisis through no fault of their own, such affected companies and businesses will be able to obtain unlimited loans from the state-owned KfW Bank via their regular bank / financing partner. In addition, the Federal Government will continue to provide export credit guarantees. Below, we are providing a brief overview of the current aid measures at federal level.

3.1 Bridging aid for small and medium-sized enterprises

The federal government's bridging aid is aimed specifically at undertakings that suffer substantial losses of turnover due to complete or partial closures or conditions imposed under Corona. There is no limitation to certain economic sectors. The support is provided for three months and can amount to a maximum of EUR 150,000. The application period ends on 31 August 2020. The programme runs from June to August 2020.

Eligible to apply are:

  • Undertakings and organisations that do not qualify for the Wirtschaftsstabilisierungsfonds (Economic Stabilisation Fund),
  • Non-profit organisations, irrespective of their legal form, which are economically active on the market on a permanent basis and
  • Solo self-employed and self-employed members of the liberal professions (main occupation),

who had at least 60% less turnover in April and May 2020 compared to April and May 2019. If an undertaking was founded after April 2019, the reference months from 2019 are November and December. If an undertaking was founded after June 2019, the months December 2019 to February 2020 are the reference months for the month of April and May 2020.

The undertaking must not have been in difficulties according to the EU definition until 31.12.2019. For non-profit organizations, the revenues (including donations and membership fees) are used instead of the turnover.

If an undertaking is not continued until August 2020, the grants are to be repaid. No payments will be made to companies that have ceased business operations or filed for insolvency.

Eligible costs are ongoing, contractually based or officially determined fixed costs that cannot be changed unilaterally during the funding period. The type of costs is conclusively determined. A list can be found here (p. 3).

The amount of the bridging subsidy depends on the extent of the slump in sales. A share of the fixed costs is reimbursed in the amount of

  • 80 % with more than 70 % drop in sales,
  • 50 % with a drop in sales of between 50 and 70 %,
  • 40 % with a drop in sales of between 40 and less than 50 %.

If at least 60 % of the sales of the previous year's month are generated in the month of promotion, the promotion is cancelled proportionally. The support must be repaid.

Irrespective of the loss of turnover, undertakings with up to five (ten) employees will be supported with a maximum of EUR 9,000 (15,000). However, this limit may be exceeded if the bridging subsidy based on the reimbursable fixed costs is at least twice as high as the maximum reimbursable amount. Then the following applies:

  • In the event of a loss of sales of between 40% and 70%, the undertaking will be reimbursed 40% of the fixed costs not yet included in the maximum reimbursement amount.
  • In the case of a loss of sales of more than 70 %, 60 % of these fixed costs are reimbursed.

Legally independent affiliated undertakings or undertakings that are owned or directly or indirectly under the controlling influence of the same person or company can only apply for the bridging allowance up to a total amount of EUR 150,000. This does not apply to accommodation facilities run on a non-profit basis.

The application is made in two stages: First, the loss of turnover must be substantiated with the help of a tax advisor or auditor and then documented with his help. The latter will also subsequently inform the granting authority of the respective country of the final turnover in the funding months.

3.2 Support Programs of the KfW Bank

In response to the corona pandemic, the KfW has launched the “KfW Special Program 2020”. This extends the existing support programs “KfW Entrepreneur Loan” and “ERP Start-Up Loan - Universal” and introduces the new programs "KfW-Fast loans 2020" and “Direct Loan Participation for Syndicated Structures”. Additionally, further programs have been adapted. In these programs, different conditions apply to small and medium-sized enterprises (SMEs) and large enterprises.

  • Small enterprises are those with fewer than 50 employees and an annual turnover or balance sheet total of up to EUR 10 million.
  • Medium-sized enterprises are those with fewer than 250 employees and an annual turnover of up to EUR 50 million or an annual balance sheet total of up to EUR 43 million.
  • Large enterprises are those with more than 250 employees and annual turnover of EUR 50 million or annual balance sheet total of more than EUR 43 million.

Below, we are providing an overview of KfW's current support measures.

3.2.1 KfW Special Program: Fast loans (Program 078)

From 15 April 2020 on, SMEs will be able to apply for " instant loans" of up to EUR 800,000 per enterprise under the KfW fast loan program. In detail:

  • Available to enterprises with more than 10 employees, thatt have been active in the market since  1 January 2020.
  • Financing for investments and working capital.
  • Enterprises with up to 50 employees can apply for a loan of up to 25% of the annual turnover in 2019, up to a maximum of EUR 500,000. The same applies to companies with over 50 employees (limit EUR 800,000).
  • The company must not have been in difficulties until 31 December 2019 and must have been in an orderly economic situation at that date. It must have made a profit on average over the years 2017-2019 (or a shorter period if it has not been on the market for that long) or in all events in 2019.
  • Interest rate of currently 3% with a term of 10 years and a possible 2-year grace period. In the event of unscheduled repayment, no prepayment penalty is due.

3.2.2 KfW Special Program: Direct Loan Participation for Syndicated Financing (Program 855

  • Participation in syndicated financing for investments and working capital of medium-sized and large enterprises.
  • Assumption of up to 80% of the risk by KfW, but limited to a maximum of 50% of total debt.
  • The KfW risk share is at least EUR 25 million. It is limited to 25% of the annual turnover in 2019, or twice the wage costs of 2019, or the current financing requirements for the next 12 months.
  • The investment is made pari passu at market conditions: KfW assumes the economic conditions provided by the financing partner.
  • The bank receives a 100% guarantee indemnity from KfW, secured by a guarantee from the federal government.
  • The loan is approved without further credit risk assessment by the bank or KfW. No collateral has to be provided.

3.2.3 KfW Entrepreneur Loan (Program 037/047)

  • Investments and general working capital up to EUR 1 billion for enterprises that have been on the market for more than 5 years.
  • The limitation to companies with an annual turnover of max. EUR 500 million is being extended to EUR 2 billion. This means that larger companies can now also take advantage of the loan.
  • Assumption of risk (liability waivers) for the on-lending financing partners (usually the regular bank) of now up to 80% for large companies and up to 90% for SMEs for working capital loans with a volume of lending of up to 200 million. 
  • The maximum loan amount is limited to either 25% of the annual turnover in 2019, or twice the wage costs in 2019, or to the current financing requirements for the next 12 months for large companies or 18 months for SMEs, or to 50% of the company's total debt for loans exceeding EUR 25 million. 
  • Term of up to 5 years with a grace period of one year for working capital financing or as a bullet maturity variant with a 2-year term.
  • Interest rate improvements: between 1% and 1.46% p.a. for SMEs, and between 2% and 2.12% p.a. for larger companies.
  • For loans of up to EUR 3 million per enterprise, KfW waives its own risk assessment. For loans up to EUR 10 million a simplified risk assessment is carried out.

3.2.4 ERP Start-Up Loan - Universal (Program 073/074/075/076)

  • Investments and general working capital up to EUR 1 billion (previously: EUR 25 million) per project.
  • Available to founders, freelancers and companies that have been active in the market for less than 5 years.
  • Assumption of the risk of the on-lending bank increased to up to 80% for large companies and up to 90% for SMEs by way of liability waivers.
  • Extension of the liability waivers also for larger companies with an annual turnover of up to EUR 2 billion. 
  • The maximum loan amount is limited to either 25% of the annual turnover in 2019 or twice the wage costs in 2019 or to the current financing needs for the next 12 months for large companies or 18 months for SMEs or to 50% of the company's total debt for loans exceeding EUR 25 million.
  • Term of up to 5 years with a one-year grace period for working capital financing or as a bullet maturity variant with a 2-year term.
  • Interest rate improvements: between 1% and 1.46% p.a. for SMEs, and between 2% and 2.12% p.a. for larger companies.
  • For loans of up to EUR 3 million per enterprise, KfW waives its own risk assessment. For loans up to EUR 10 million a simplified risk assessment is carried out.
  • Additional measures of the Federal Government are in progress.

3.2.5 ERP Start-Up Loan - Start-Up Capital (Program 067)

  • Target group: Small commercial enterprises and freelancers up to 50 employees and with an annual turnover or annual balance sheet total of max. EUR 10 million, which have not yet existed for 5 years.
  • Maximum amount: maximum EUR 30,000 for working capital (total borrowed capital requirement max. EUR 100,000).
  • Duration: Maximum 10 years with a 2-year grace period.
  • Collateral: Standard bank collateralization with 80 percent liability waiver for the regular bank.

3.3 Hardship Fund for Self-Employed Persons, Freelancers and Micro-Enterprises

The Federal Government is setting up a hardship fund for solo self-employed persons, freelancers and microenterprises for whom short-time work compensation and liquidity support cannot always provide the right support (key paper BMWi). It is intended to support those affected, in particular with regard to rental and leasing costs and other operating costs for up to 3 months (securing their economic existence). If the lessor reduces the rent by 20% and the subsidy is not fully utilized, it can be used for up to 2 further months.

  • Self-employed persons and companies with up to 5 employees (full-time equivalents): one-off payment of up to EUR 9,000 for three months.
  • Self-employed persons and companies with up to 10 employees (full-time equivalents): one-off payment of up to EUR 15,000 for three months. 
  • Applicants must insure against financial difficulties (occurring from 11 March 2020 onwards)

The grant is non-repayable (except for surpluses).
In addition, the Federal Government is making it easier for the self-employed to access basic social security, especially class II unemployment benefit [Arbeitslosengeld II, Alg II]. The exceptions initially apply for the next 6 months.

  • Securing livelihood and accommodation.
  • Financial circumstances currently do not have to be disclosed, nor do existing assets have to be used.
  • Applications are approved on a provisional basis. The means test will be carried out subsequently.

3.4 Financial Aid for Start-Ups

Federal Minister of Finance Scholz announced on 31 March 2020 additional financial aid for start-ups (PR). The funds have a volume of EUR 2 billion and are available for venture capital financing to public venture capital investors such as KfW Capital, the European Investment Fund or the High-Tech Gründerfonds in the short term. The financial aid is divided into two pillars:

  • Pillar 1 (Corona Matching Facility) is designed to provide liquidity to portfolio companies of such professional private venture capital funds accredited by KfW Capital or the European Investment Fund. VC funds are eligible to apply. Their financing rounds are to be supplemented by public funds.
  • Pillar 2 is designed for Start-ups that do not fall under Pillar 1. Federal funding is to be provided through cooperation with the regional companies and funding institutions. The Federal Government and the respective state company share the risk, if necessary also with private investors. Up to EUR 800,000 per undertaking can be provided.

In addition, public financiers are to be put in a position in which they can take over shares from defaulting fund investors with public funds. In the medium term, the already announced future fund for start-ups (independent of corona) with a total volume of EUR 10 billion also aims to support them. 

3.5 Export Credit Guarantees

The Federal Government continues to grant export credit guarantees (Hermes Cover) for exports to China or coronavirus risk areas. Previous confirmations of cover are not affected. Previous confirmations of cover are not affected. In addition, the "list of marketable risks" has been cancelled until 31 December 2020. As a result, export credit guarantees for export transactions can now also be granted on short-term payment terms (up to 24 months) for EU countries and several OECD countries (Australia, Iceland, Japan, Canada, New Zealand, Norway, Switzerland, USA and the United Kingdom). Further information can be found on the website of Euler Hermes AG and the Foreign Trade and Investment Promotion Scheme of the Federal Republic of Germany [Auslandsgeschäftsabsicherung der BRD]. Further information can be found here on the suspension of the list.

3.6 Guarantees

For companies that had sustainable business models until the crisis, easier and faster access to guarantees will be created.

  • Doubling of the maximum amount of guarantees for deficiency guarantees to EUR 2.5 million at the guarantee banks. The federal states or their funding institutions are responsible for guarantees extending beyond this.
  • Increase in the assumption of risk by the Federal Government through counter-guarantees of up to 80%.
  • Guarantee banks make guarantee decisions up to an amount of EUR 250,000 independently and within three days.
  • The parallel state and federal state guarantee program “Großbürgschaftsprogramm” for guarantees of up to EUR 50 million to secure working capital financing and investments is being extended to cover the whole of Germany (having been limited to date to companies in structurally weak regions). The Federal Government will assume up to 80% of the risk.
  • In structurally weak regions, the Federal Government contributes half in cases of guarantees of EUR 20 million or more.

4. Measures at Federal State Level

4.1 Federal State Subsidies

In all federal states, extraordinary support programs have been set up or existing programs extended, on the basis of which subsidies can be paid out in the form of loans and in some case immediate aid from the individual federal states.

This has been pioneered by Bavaria. Here, companies with up to 250 employees and freelancers (with a permanent establishment in Bavaria) can apply for immediate aid of between EUR 5,000-30,000 in the event of a liquidity bottleneck due to the corona crisis. In addition, a so-called "Bayernfonds" is currently being set up to protect larger medium-sized companies, which can directly invest in key-sector enterprises affected by the corona crisis (press release).

In NRW, the "NRW Rescue Package" has been adopted (press release). It provides, inter alia, the following emergency measures:

  • Expansion of the framework for providing guarantees for economic development by EUR 4.1 billion to EUR 5 billion. The framework for guarantees and counter-guarantees is being increased by EUR 900 million to EUR 1 billion.
  • Authorization of the Ministry of Finance to grant NRW.BANK global, one-off indemnity against liability under the NRW.BANK Universal Credit Program up to an amount of EUR 5 billion.
  • Assistance for micro-enterprises: Immediate aid of up to EUR 25,000 for enterprises with 10 to 50 employees (NRW’s own extension of the hardship fund).
  • Independently of the "NRW Rescue Package", the federal state government also emphasizes the possibility of dormant holdings in small companies without involving the regular bank and without collateral of up to EUR 75,000 via the micro-mezzanine fund (for further information click here).

Finally, in some federal states, liquidity aid for micro-enterprises and freelancers is currently being granted under support programs to improve regional economic structures (Gemeinschaftsaufgabe “Verbesserung der regionalen Wirtschaftsstruktur”, GRW), in some cases in simplified procedures.

4.2 Implementation of Support Programs

The federal states are participating in the implementation of the Federal Government's programs, in particular via their respective federal state banks. Information on the adapted federal state support programs can be found on the websites of the federal state banks (in brackets are links to the respective federal state webpages with information for enterprises concerning corona):


Bavaria: Landesförderbank Bayern
Baden-Württemberg: L-Bank
Berlin: Investitionsbank Berlin
Brandenburg: Investitionsbank des Landes Brandenburg
Bremen: Website
Hamburg: Hamburgische Investitions- und Förderbank
Hesse: Wirtschafts- und Infrastrukturbank Hessen
Mecklenburg-Vorpommern: Bürgschaftsbank Mecklenburg-Vorpommern GmbH
Lower Saxony: NBank
North Rhine-Westphalia: NRW.Bank
Rhineland-Palatinate: Investitions- und Strukturbank Rheinland-Pfalz
Saarland: Saarländische Investitionskreditbank AG
Saxony-Anhalt: Investitionsbank Sachsen-Anhalt
Saxony: Sächsische Aufbaubank
Schleswig-Holstein: Investitionsbank Schleswig-Holstein
Thuringia: Thüringer Aufbaubank


You will find regular updates on this topic on our website at

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Dr. Peter Etzbach<br/>LL.M. (Fordham)

Dr. Peter Etzbach
LL.M. (Fordham)

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Dr. Daniel Dohrn


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Dr. Simon Spangler<br/>LL.M. (UCT)

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