The European Commission has authorised, under EC Treaty state aid rules, a scheme offering reduced-interest loans to businesses investing in the production of environmentally friendly products, as part of the German package to tackle the current economic crisis.

The European Commission has authorised, under EC Treaty state aid rules, a scheme offering reduced-interest loans to businesses investing in the production of environmentally friendly products, as part of the German package to tackle the current economic crisis. It will allow state, regional or local authorities to grant until 31 December 2010 loans with subsidised interest payments until 31 December 2012 at the latest. The scheme meets the conditions of the Commission’s Temporary state aid framework that gives Member States additional possibilities for providing businesses with improved access to financing during the economic and financial crisis (see IP/08/1993 ). In particular, it respects the minimum interest rates and environmental standards defined in the Framework and it applies only to businesses that were not in difficulties before 1 July 2008. It is therefore compatible with Article 87(3)(b) of the EC Treaty, which permits aid to remedy a serious disturbance in the economy of a Member State.

Competition Commissioner Neelie Kroes said: "The German measure will ease the credit constraints on businesses affected by the current economic situation, provided that they invest in products that are more environmentally friendly. This will encourage companies to prepare for the challenges of the future by enabling them to emerge from the crisis with a sustainable business model, more consistent with EU environmental objectives."

The scheme is based on the provisions of the temporary framework on aid for the production of green products. In particular, the investment must relate to products that will meet or surpass future Community environmental protection standards. The reduction in the interest rate may not exceed 50% for small and medium-sized enterprises (SMEs) and 25% for large businesses in relation to the reference rate as defined in Section 4.4.2 of the temporary framework and for a maximum term of two years. Thereafter, until 31 December 2012, the reduced interest rate has to be at least equal to the aforementioned reference rate. In any event, the interest rate must take into account the enterprise's risk profile at the time when the loan is granted. The aid scheme only applies to businesses that were not in difficulties on 1 July 2008. Lastly, the monitoring reports to be submitted to the Commission by the German authorities must include additional information, in particular the sectors of activity covered and the environmental benefits of the measure.

This scheme is the fifth measure authorised for Germany under the new temporary framework for state aid, after the scheme for aid of up to €500 000, the risk-capital scheme, the guarantee scheme and the reduced interest rate scheme. The present green product measure is entirely independent from the latter scheme. Germany is the fourth country to avail itself of the provisions on aid for production of green products under the Temporary framework.