European Social Fund financial instruments and State aid

This factsheet aims to provide an overview of the State aid rules with implications for the use of financial instruments financed through the European Social Fund (ESF) in a concise and user-friendly manner. The factsheet is based on the relevant European Union (EU) Regulation, available fi-compass resources and the European Commission’s (EC) ‘Guidance on State aid in European Structural and Investment (ESI) Funds Financial instruments in the 2014-2020 programming period’.

Whenever public authorities provide funding to support economic activities, care has to be taken to ensure that it complies with the EU rules on State aid. ESF managing authorities implementing financial instruments should ensure State aid compliance at all levels of the implementation. State aid may be present at different levels and compliance with the State aid rules at the final recipient level, in the context of financial instruments, is not enough. The State aid legal base determines the entire design of the financial instrument and needs to be chosen from the outset as it determines the eligibility criteria, maximum amount per final recipient, minimum private investment, other financial and governance parameters.