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Law360 (May 18, 2020, 2:13 PM EDT) -- European competition authorities gave their blessing Monday to a €903 million ($984.59 million) Belgian reinsurance plan to shore up trade credit insurance, which helps buyers pay for goods and services without cash upfront, as the coronavirus wreaks havoc on the global economy.
The scheme was approved under European Union state aid rules designed to prevent individual countries within the European bloc from unfairly subsidizing their own industries. The European Commission only approved the plan as a coronavirus response.
Noting that trade credit insurance protects companies supplying goods and services against the risk of nonpayment by their clients, the EU said current circumstances have put that market on thin ice.
"Given the economic impact of the coronavirus outbreak, the risk of insurers not being willing to maintain their insurance coverage has become higher," the European Commission said in a statement Monday. "The Belgian reinsurance scheme [ensures] that trade credit insurance continues to be available to all companies, avoiding the need for buyers of goods or services to pay in advance, therefore reducing their immediate liquidity needs."
The commission found that the scheme devised by Belgium is "necessary, appropriate and proportionate to remedy a serious disturbance in the economy" of a member state, in line with state aid rules. The plan was also determined to fit within the EU's temporary coronavirus framework.
Also Monday, the competition watchdog cleared a Danish plan to provide backup for trade credit insurance, but the price tag wasn't immediately clear.
The commission assessed Denmark's measure under EU state aid rules and found that the scheme is compatible with the EU treaty and is "well targeted to remedy a serious disturbance to the Danish economy," and so will contribute to managing the economic impact of the coronavirus in Denmark.
"The Danish guarantee scheme will help ensure that trade credit insurance remains available to all companies to secure their commercial exchanges," EU competition chief Margrethe Vestager said in a statement. "This will protect their liquidity needs and help them continue their activities in these difficult times."
"We continue working closely with member states to ensure that national support measures can be put in place in a coordinated and effective manner, in line with EU rules," she added.
--Editing by Stephen Berg.
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