MADRID, (Reuters) – Spain’s Government approved Tuesday a six month extension to June 2023 for the voluntary write-off of state-backed loans. This was part of a restructuring plan that aims to reduce debt and help businesses cope with the COVID-19 pandemic.

The European Commission granted extensions to support measures in recent weeks. This was consistent with a Reuters Report last week.

In March, a set of measures was adopted to help companies reduce excess debt and increase solvency. It included 3 billion euro ($3.36 trillion) in restructurings of debt. The voluntary code of practices will be used by banks.

Spanish companies could also apply for participation loans. This hybrid instrument can be converted into capital as the relief focus shifted to solving solvency problems across Europe.

For firms that were solvent, the government extended them until June 2022.

A code of best practice will be updated to enable households and companies affected by La Palma’s volcanic eruption to request credit assistance.

According to the Code, Spanish banks can apply for voluntary writing-offs of state loans that they have in their debt restructurings. This is for businesses whose revenues are significantly lower than usual.

To help households and businesses meet liquidity requirements, the government issued 100 billion Euro state-backed loans. The loans were followed by investments loans of 40 billion. These measures were both extended in this month.

Under each loan’s loss-sharing plan, the write-offs can be considered a last resort.