EU authorizes state aid for firms impacted by Ukraine war

EU member states can offer limited subsidies and cheap loans to companies affected by the war in Ukraine and sanctions against Russia, the bloc's competition authority said on Wednesday.

"We need to mitigate the economic impact of this war and to support severely impacted companies and sectors," said EU competition chief Margrethe Vestager.

The economy in the Europe Union is deeply affected by the conflict, with many companies suffering major disruption due to their direct links with Russia and Ukraine and the jump in energy prices.

"The sanctions adopted by the EU and its international partners have severely affected the Russian economy... (but they) also take a toll on the European economy and will continue to do so in the coming months," Vestager said.

The European Commission has therefore triggered special provisions to allow non-farming companies to immediately receive as much as 400,000 euros (US$440,000) in government aid to help weather the crisis.

Governments are also allowed to inject struggling companies with subsidised loans or guarantees for existing loans that may not be repaid.

Companies that are intensive energy users will also be able to get help paying their bills, which for now will be capped at two million euros, the EU said.

If businesses incur operating losses, governments will be able to significantly ramp up the energy aid, with industrial companies able to claim a rescue package of up to 50 million euros.

The commission said the crisis measures would be in place until December 31, 2022 with a reassessment before that date on a possible extension.

Fears are growing that the war in Ukraine could have a long-term shock on the European economy.

Forecasters warn that the bloc's expected growth of four percent this year could be significantly slower because of the conflict.