As the global financial crisis deepens, so the European Commission continues to review Member States’ aid packages to the banking sector. As of February 16, 2009, the Commission had adopted 42 decisions relating to state aid to the financial sector, and an additional 11 are currently being assessed.

As a backdrop to these decisions, the Commission has published guidance on how the state aid rules can be applied in this difficult economic climate. On December 5, 2008, the Commission published guidance on how Member States can recapitalize banks in line with EU state aid rules in order to stabilize financial markets without distorting competition. The new guidance states that appropriate safeguards must be put in place to ensure that public money is used to stimulate lending to the real economy. Beneficiaries of such aid must not use it to put them at a commercial advantage over competitors who have not received similar aid. The guidance also reiterates that state intervention in the financial sector should only exist for as long as there is a crisis in the financial markets.

On December 17, 2008, the Commission adopted a temporary framework allowing Member States to adopt temporary measures to address the exceptional difficulties faced by companies trying to obtain financing in the current economic crisis. Under this framework, Member States do not need to notify of certain types of aid, including: subsidised loans, loan guarantees at a reduced premium, risk capital of up to €2.5 million for SMEs (when at least 30 percent of investment costs come from private investors) and direct aids of up to €500,000 per company. Under this framework, the Member States can grant these types of aid, subject to conditions, until the end of 2010.

More generally, the Commission published guidelines to assist Member States’ courts in applying EU state aid rules February 25, 2009. These guidelines are aimed at supporting national courts and potential claimants in domestic state aid challenges, in particular concerning the recovery of illegal aid from the beneficiary, interim relief or possible damages actions. The guidelines also explain how national judges can ask the Commission for information or opinions on the application of the state aid rules.