The European Commission has approved a €61m emergency loan from Belgium to private rail freight operator Lineas to support stability in the sector.
The measure conforms with European state assistance regulations, according to the EU's competition authorities.
The loan was approved by the federal government as part of the summer budget agreement. Due to an unanticipated decline in demand from the steel, chemicals, and automotive industries, Lineas, the biggest private rail freight operator in Europe, has had financial difficulties. The company's short-term cash needs are supposed to be met by the 61 million euro loan.
The financing agreement's terms and temporary nature are in line with EU state assistance standards, the Commission said in a press release. Any direct or indirect financial or economic assistance given to businesses by public bodies is referred to as "state aid," and it is only permitted under the stringent guidelines outlined in European law.
The European Commission is in charge of monitoring state assistance, making sure that it doesn't discriminate against businesses or stifle internal market competition.
The significance of rail freight as a low-emission substitute for road transportation was considered by the Commission in its evaluation. Belgium has promised to submit a restructuring plan in the event that the loan is not repaid.
The Commission investigated two previous financial infusions into Lineas, including contributions from the public investment vehicle, the Public Participation and Investment Company (FPIM), in response to a complaint. It came to the conclusion that these actions did not qualify as state assistance.
With operations in Germany, France, and the Netherlands, Lineas is the biggest private rail freight operator in Europe, with its headquarters located in Belgium. Argos Wityu, a private equity firm, and FPIM are its shareholders. The company, which specializes in rail-based freight transport, wants to encourage a "modal shift" in Europe by switching from road to rail for the transportation of products.
Lineas joined the European Rail Freight Association (ERFA) in February 2020. ERFA is a coalition that aims to help create a fully liberalized and competitive European rail freight market.
What restructuring plan did Belgium commit to present?
Belgium committed to submitting a restructuring plan for Lineas if the €61 million deliverance loan isn't repaid within the specified timeframe, as needed under EU state aid rules for similar exigency measures.
The plan must outline Lineas' path to long- term viability, including cost reductions, effectiveness advancements, and strategies to address liquidity issues from declining freight demand in crucial sectors like sword and automotive.
The Commission will assess the plan to insure proportionality, with implicit remedies like divestitures or behavioral commitments if aid deformations competition; previous Belgian aid to Lineas was cleared after scrutiny.