BRUSSELS — In another sign of the strain that the financial crisis is putting on the European Union, regulators agreed Tuesday to revise again the guidelines that had been holding up some government aid to banks, after pressure from France and Germany.
During a meeting with the 27 European finance ministers, Neelie Kroes, the competition commissioner, agreed to make her second clarification of subsidy rules in two months.
The move was prompted by a battle between Ms. Kroes and the French government, which wants to pump 10.5 billion euros, or $13.3 billion, into six relatively healthy banks to smooth the flow of credit to businesses.
The European Commission, the executive arm of the European Union, has questioned whether the deal breaks laws that ban governments from subsidizing companies and distorting competition. These are considered some of the most fundamental laws upholding the world’s most populous single market.
But with the European Union already applying its rules on government deficits with newfound flexibility, the commission is under pressure to give equal ground over the enforcement of regulations on state aid.
At the meeting Tuesday in Brussels, several other countries, including Finland, Germany and Sweden, joined France in complaining about restrictions that discouraged solvent banks from taking state aid that could be used to expand lending.
After the talks, Christine Lagarde, the French economy minister, said Ms. Kroes had given ground. “Mrs. Kroes acknowledged that she had radically changed her approach,” Ms. Lagarde said, adding that she would distinguish between banks considered solvent before the financial crisis and those that were already under strain.
Ms. Lagarde added that she was confident that the French recapitalization plan would proceed without concessions that had been sought by Ms. Kroes’s office — particularly over dividends to shareholders that banks benefiting from state aid might be allowed to offer.(by.Stephen castle)
During a meeting with the 27 European finance ministers, Neelie Kroes, the competition commissioner, agreed to make her second clarification of subsidy rules in two months.
The move was prompted by a battle between Ms. Kroes and the French government, which wants to pump 10.5 billion euros, or $13.3 billion, into six relatively healthy banks to smooth the flow of credit to businesses.
The European Commission, the executive arm of the European Union, has questioned whether the deal breaks laws that ban governments from subsidizing companies and distorting competition. These are considered some of the most fundamental laws upholding the world’s most populous single market.
But with the European Union already applying its rules on government deficits with newfound flexibility, the commission is under pressure to give equal ground over the enforcement of regulations on state aid.
At the meeting Tuesday in Brussels, several other countries, including Finland, Germany and Sweden, joined France in complaining about restrictions that discouraged solvent banks from taking state aid that could be used to expand lending.
After the talks, Christine Lagarde, the French economy minister, said Ms. Kroes had given ground. “Mrs. Kroes acknowledged that she had radically changed her approach,” Ms. Lagarde said, adding that she would distinguish between banks considered solvent before the financial crisis and those that were already under strain.
Ms. Lagarde added that she was confident that the French recapitalization plan would proceed without concessions that had been sought by Ms. Kroes’s office — particularly over dividends to shareholders that banks benefiting from state aid might be allowed to offer.(by.Stephen castle)
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