Urgent review of EU state aid rules

EU state aid rules on bank guarantee schemes and re-capitilisation are being reviewed urgently to enable faster decisions by the commission.

European Competition Commissioner Neelie Kroes also said she will change her approach in judging state aid cases generally in light of the financial crisis.

She was criticised by a number of EU Finance Ministers yesterday, especially Germany, Sweden and France that accused the commission of responding too slowly to bank bail out schemes.

Mr Kroes agreed to improve the guidelines on competition rules which were published on Monday.

“Its an urgent matter and we need to get this through so we can get refinancing measures through without sacrificing competition rules,” said French Finance Minister Christine Legarde. The revised rules would be submitted by December 12 at the latest, she added.

Ms Kroes told the ministers she had radically changed her approach to considering state aid rules and banks.

In this she was responding to member states’ demands that banks should not be discouraged from raising capital from private investors and that subsidies to banks give credit to companies aimed at boosting growth should be allowed.

Irish officials said they had no problems with the commission over the issue of state aid rules.

The Finance Ministers agreed broadly to the commission’s €200bn recovery plan, including that measures taken by individual states should add up to about 1.5% of overall GDP.

However while they also agreed that the commission should fast forward payments for structural projects, they refused to agree that unspent commission funds could be used to boost growth projects throughout the union.

Ministers agreed banks should hold at least 5% of debt packages they are selling on, to prevent another subprime crisis.