Our official complaint and our letter to the President and the Commissioners about discrimination of Social economy legal forms, State aids Covid 19. Services directive
Honorary President of the European Commission, Ms. Ursula Von Der Leyen
Honorable Vice President of the European Commission, Mr. Frans Timmermans
Commissioner of Internal Marketing, Mr. Thierry Breton
Commissioner for Jobs and Labor, Mr. Nicolas Schmit
Commissioner for Competition Ms. Margrethe Vestager
Director-General of Legal Service, Mr. Mr Luis Romero Requena
C/C co-chairs of Social Economy Intergroup in EP Mr Sven Giegold & Ms Patrizia Toia
president of Social Economy Europe, Mr Juan Antonio Pedreno
director of Social Economy Europe, Mr Victor Meseguer
Subject: Discrimination of Social economy legal forms. State aids Covid 19. Services directive
Dear Ladies, Dear Sirs
I am Nikos Chrysogelos president of the social cooperative Anemos Ananeosis / Wind of Renewal in Athens running the innovative WELCOMMON HOSTEL, a hostel with social and green impact which is nowadays locked down. In this hostel we used to host groups of young tourists and a number of refugees offering them language courses, training for social insertion and social services for their children. It is also a center for social and green innovation and economy.
I am writing to you to complaint for a discrimination suffered in Greece by the entities of social economy, taking advantage of the letter addressed by Commissioner Mr. Nicolas Schmit to the national Governments on April 23, 2020, where he is calling on Member States to ensure strong support for the social economy at this time of serious crisis due to the COVID19.
In Greece, however, the social economy entities not only suffer from the lack of supportive policy from the national and regional authorities but in addition they are excluded from any aid, subsidies and other financial support related to the COVID19 crisis, as explained in the annex.
In practice, the terms and conditions imposed by Government decisions and by financial institutions, for lending to companies suffering from the crisis, prevent social enterprises from claiming financial support because they do not have the appropriate legal form. This is contrary to the statement found in the relevant Commission’s decisions, according to which all types of enterprises can profit from the State aid measures. This causes to us an inadmissible competitive disadvantage and it is a discrimination in violation of the Services Directive.
Given that the new COVID19 financial instruments should be addressed to all types of enterprises, you are kindly asked to take action in order to remedy to this inadmissible situation, by taking into account the particularities of the companies in the field of Social Economy.
Annex to the letter to EU Commission
SUBJECT: DISCRIMINATIONS AND EXCLUSION OF SOCIAL ECONOMY FROM RECOVERY MEASURES COVID-19
The European Commissioner for Jobs and Social Rights, Mr. Nicolas Schmit, in a letter dated 23 April 2020 to the Ministers of Labor of the EU, calls on Member States to take all necessary measures to ensure strong support for the social economy entreprises.
State aide measures
In the meantime, the Commission has adopted a Communication on Temporary Framework for State Aid Measures to support the economy in the current COVID-19 outbreak1 on the basis of which it approved a Greek guarantee scheme on this issue and an amendment to that scheme 2.
These latter texts concerning State aids make it clear that Member States are authorized to grant various support measures to undertakings of all kinds in all sectors, as it is literally stated.
Discrimination of social cooperatives; Services Directive
However, we consider that the cases described below, in the context of the application of the support measures, create a negative discrimination of social cooperatives on the grounds of their legal form, when compared with other types of businesses, using different legal form.
We regard this situation as contrary to the provisions of the Services Directive Article 15(2)(b).
Social and Solidarity Economy Enterprises in Greece are created in the form of Social cooperatives with limited liability (Koinsep in GR) and are governed by the Law 4430/2016. As such they are considered as companies by the Treaty Article 54 TFEU and therefore they are entitled to enjoy all rights recognized by EU law to enterprises.
However, they are excluded from the “special purpose allowance” COVID-19 granted to other enterprises (800€) like limited and unlimited partnerships, liberal professions, private single person capital companies (Ministerial Decision 39162 ΕX 2020, Nat Gazette B 1457 – 16.04.2020).
This aid measure excludes all kinds of social economy enterprises, even those locked down by Government Decision, like our Welcommon Hostel. This policy creates an unequal treatment regime since for the same code of commercial activity (in Greek KAD) other companies receive the aid of 800€ and others do not, depending on their form. The answer sent to our application reads as follows: “We would like to inform you that you are not entitled to the special purpose allowance, because the conditions of articles 2 and 3 of Decision 39162 EX 2020 are not met. Specifically: You are not a liberal professional or a self-employed person, owner of a sole proprietorship or a personal company or a private one-man capital company”.
Exclusion from subsidies to the interest of professional loans. (Ministerial circular 32790/ par 13§1 3). All social economy enterprises are excluded from receiving subsidies on the interest they pay for their existing professional loans, for the simple reason that they are not capital based companies. In fact, applications are dismissed because credit institutions are bound to examine only demands of capital companies with limited liability. In reality the circular foresees that only the undertakings mentioned in Annex I of Company Law Directive 2013/34/EU, on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, are covered; and according to the Greek relevant declaration these are only public and private companies limited by shares (and the unlimited partnerships with shares) but not social cooperatives 4.
Aid in the form of repayable advances: Facing a severe lack of liquidity, as all other tourist establishments, we tried to get informed about loans COVID19 from banks that act as intermediaries between European (or national) funds and the enterprises. We realized that the same problem appears also in this case, in the sense that a company applying for a repayable advance should not be an undertaking in difficulty according to the definition of Commission Regulation 651/2014 declaring certain categories of aid compatible with the internal market. However, only the companies mentioned in article 2 point 18 of this Regulation, are entitled to apply and these are again the types of companies that are mentioned to the Annex I of the directive 2013/34/EU, on the annual financial statements, as explained above.
Questioning the high rate for loans based on EU funds
In addition we would like the Commission to renegotiate with the Greek authorities a number of points concerning aid conditions like interest rate of 8% or 10% levied by the banks that are intermediaries for repayable advances of Community funds, which is not reasonable neither and proportionate.
Furthermore, if an amount is pledged as collateral by some members of social economy enterprises in order to help their undertaking – since for the legal entities it is impossible to access even European-funded loans – this sum which is deposited and blocked in the bank is granted an interest rate of 0.15% while the loan granted to the coop, like a repayable advance or open loan or otherwise, is charged with an interest rate of over 8%, which is exorbitant.
It is almost impossible for social economy companies to benefit from a European-backed program such as Greek TEPIX I and II in support for small undertakings, given that banking criteria both before and during the crisis exclude them. There are examples of such exclusions, even for innovative business plans which, if they were presented by other legal forms of business would be sure to be included in the financing program.
Absence of favorable environment
At present, any application for a COVID 19 State aid should be signed by an accountant declaring that “the loss the company suffered in 2019 is less than 50% of registered capital”. However, it is very likely that the majority of Greek social economy enterprises have suffered losses in previous years, either due to a crisis or due to investments made as start-ups and are therefore nowadays excluded from loans for cash flow, although not in bankruptcy or similar procedure.
For example, a social economy business in tourism, as is the case of our Welcommon Hostel, that started in 2018 without subsidies or loans but only with funds from members and friends, needs at least 3-4 years to reach a degree of economic viability. Therefore, it is perfectly normal to have losses in previous years. And for this reason, it is now being prosecuted and risks bankruptcy, as it does not have access to the necessary cashflow and restart liquidity.
Hygiene and safety measures, especially for the tourism and catering industry, are costly (cleaners, disinfectants, uniforms, physician, insurance, staff training, equipment required, etc.), while the environment in which these businesses are back after the crisis is uncertain. In addition, obligations (rent, electricity etc) have not been written off and many costs had to be paid within the lockdown period. In Greece banks are asking for a mortgage or other real surety or even a deposit at least equal to the requested cash flow, as a prerequisite for considering such a demand.
However, it should be noted that according to the information published by the Ministry of Labor (2017) concerning social economy there are €161 million from European Community funds in order to finance the Greek “Action Plan for the development of the social economy 2017-2023 ” out of which less than 1% (+-1.3 m) is committed.
Measures to support employment
If employment and training in green and socially good jobs are not supported today, we will see soon an increase of the number of jobless people, especially in countries with already high unemployment rates, such as Greece. The measures to support employment through “community service”, within local authorities, or in public or semipublic organizations etc., implemented for several years, do not give to social economy enterprises a chance to actively participate and draw an advantage; and this despite the fact that the funding of the program comes from the European Social Fund and that the role of the social economy in social and professional integration is well known as this was pointed out in the letter of Commissioner N.Schmit to the Member States.
While many European countries have already implemented national and regional employment support programs through the social economy, there has been no similar planning in Greece. However, at European level, before and after the crisis, social economy businesses were considered to be a key tool for reducing unemployment and for training unemployed and socially vulnerable young people to subjects and professions that are important for social and ecological sustainability, green – circular economy and digital modernization.
Unfortunately, in Greece the European Social Fund resources continue to be treated as unemployment benefits to reduce its extreme dimensions but by no means as tools for the promotion of a social economy enterprise nor as means for the insertion to the work of the most vulnerable people. In fact, jobless people are not offered experience in important, sustainable and promising areas of activity, like health and safety areas, social and green innovation, or digital modernization; in other words these national programs do not create the conditions for finding a long-term job after the end of support programs.
The actual policy of Greek authorities concerning investment and training programs should be revisited since the resumption of business activities cannot anymore be based on the operating conditions of the past. In this context social economy enterprises can play an important role as training vehicles.
We urge you to ask the Member State to remove all obstacles and discrimination against social economy in Greece especially when European financial resources are used for this objective. The actual suffocating environment does not help to attain the recovery of the economy and employment through social, digital, and green transition.