Political agreement to phase out relief packages and launch new stimulus and export initiatives

7.1.2020

On 15 June 2020, a majority of the Danish parliament (Folketinget) announced a political agreement to phase out the existing relief packages and launch a number of new stimulus and export initiatives. We will below give you an overview of the new agreement.

Phasing out of relief packages 

The Danish COVID-19 economic expert group recommends that the relief packages are to be phased out. In connection with the phasing out, more emphasis will be given to the existing loan and guarantee schemes. However, the political parties still wish to compensate enterprises and employees in highly exposed industries. 

Phasing out of scheme compensating the fixed costs of enterprises 

The compensation scheme for the fixed costs of enterprises will be phased out, and a new, targeted and temporary scheme compensating the fixed costs will be introduced. The current compensation scheme for the fixed costs of enterprises will terminate on its planned expiry date on 8 July 2020.
 
Simultaneously, a new and temporary compensation scheme for fixed costs will be introduced, targeted at enterprises that are still affected by COVID-19 restrictions in the form of: 

  • ban on staying open late;
  • ban on gatherings;
  • border closures;
  • travel advice issued by the Ministry of Foreign Affairs of Denmark. 

 

The new, targeted and temporary compensation scheme will be in force in the period from 9 July 2020 until and including 31 August 2020, after which it will terminate. 


Phasing out of compensation scheme for self-employed and freelancers, etc. 

The current compensation scheme for self-employed and freelancers, etc. will be extended by one month to 8 August 2020, after which it will terminate. 
 
The political parties have agreed to allow self-employed and freelancers, etc., on termination of the scheme, to earn unemployment benefits without any requirement for a preceding 12-month membership of an unemployment insurance fund, provided that they register for membership in the period from 8 July until and including 8 August 2020.


Phasing out of salary compensation scheme

The current salary compensation scheme was extended on 8 June 2020 and will terminate on 29 August 2020 except in cases of forced closure of enterprises. For such enterprises, the salary compensation scheme will remain in force until the forced closure is lifted.


Existing loan and guarantee schemes

Concurrently with the phasing out of the relief packages, drawings on the existing loan and guarantee schemes are expected to increase.
 
The deadline for applications under the existing guarantee schemes has been extended to the end of 2020, and the guarantee percentage has been increased from 70 % to 80 %.


Stimulus initiatives

The stimulus initiatives include: 

  • payout of frozen holiday funds accrued in the period from 1 September 2019 to 31 March 2020, corresponding to three weeks' holiday;
  • payout of a tax-free one-off grant of DKK 1,000 to a number of benefit recipients who were wholly or partially subsidised by the public in April 2020 (e.g. students, old-age pensioners, welfare benefit recipients, etc.);
  • temporary increase in tax relief on corporate research and development expenses from 110 % to 130 % in the period 2020-2021, but capped at DKK 50 million;
  • a so-called "summer package" of DKK 700 million favouring inititatives such as summer holidays in the countryside and on the islands, culture and nature experiences in the Danish summer, and summer activities for senior citizens;
  • DKK 50 million for VisitDenmark's international 2020 tourism campaign.

 

In addition, the parties to the agreement have agreed to discuss the possibility of a so-called "aviation package" intended to support domestic aviation and follow up on the previous travel industry relief packages in the light of the travel advice issued by the Ministry of Foreign Affairs of Denmark. 


Export initiatives

The export initiatives include the creation of a government fund to act as an investor of last resort. The fund is to assist in recapitalising Danish enterprises by contributing a kind of equity and securing a sufficient capital base in large, and otherwise healthy, crucial Danish enterprises. The fund is based on nine key principles, including, for example, that the fund must undertake decisive, passive equity investments without influence. Consequently, the fund will not obtain voting equity. The fund will solely be entitled to intervene when necessary, and the volume and life of the fund will be limited and defined in a clear exit strategy. The fund must generate a return on its investments to the fund/government.


The fund's recapitalisation decision must be based on four recommended selection criteria, according to which the enterprise must:

  • have been extraordinarily affected by COVID-19;
  • be of importance to Danish economy, including have a revenue exceeding DKK 500 million in the latest audited financial year;
  • have a significant Danish presence, play a key role within the industry and maybe have a high export share, and be highly productive and difficult to replace;
  • have been financially sound before the crisis and have a future financial potential after the crisis subject to normalisation of the economy.

 

The government will contribute DKK 10 billion to the fund. The proposed fund application window will be 18 months, i.e. until 31 December 2021, and the life of the fund will be limited to three years, i.e. until 30 June 2023. The specific details will be subject to discussion based on the proposal presented by the government.

 

Part of the export initiatives is a so-called "export package". DKK 500 million will be set aside for initiatives involving "restart teams" that focus on green technology and an additional strengthening of the existing Export and Job Creation Taskforce set up by the Danish Ministry of Foreign Affairs, which e.g. assists Danish enterprises in accessing markets and creating new market opportunities.


Another initiative is to create a restart fund of DKK 3 billion under the Danish Growth Fund, the purpose of which is to secure solvency in otherwise healthy enterprises that need patient capital to protect them through the crisis. The restart fund investments will be made on market terms, focusing on small new enterprises, SMEs, and small midcaps with a sustainable business model. The focus will be on industries that have been particularly hard hit by the COVID-19 crisis. The investments can be undertaken directly or indirectly through funds, and new investments can be undertaken until the end of 2021. 

What happens next?

Many of the initiatives require rushed legislation both before and after the summer vacation. Consequently, the next weeks will see a number of Bills preparing the way for the agreed initiatives, as well as new or revised Executive Orders.


The parties agree that the relief and compensation schemes, etc. in general will not be extended any further than specified in the agreement.