EU divided over bailouts

THE EUROPEAN Union is studying the option of offering support to its carmakers, but the Commission was divided yesterday over the extent of any aid as other sectors also face a downturn. EU Industry Commissioner Guenter Verheugen signalled support for a German offer to help Opel, but others in Brussels insisted there could be no special treatment for the car industry.

"You cannot compare the car sector with the financial sector," Competition Commissioner Neelie Kroes said, referring to the mass bailouts by EU governments last month of banks.

EU sources said the Commission would propose ways of helping the car sector in the EU next week as part of a broad package of economic stimulus measures.

But any aid would be temporary, would have to meet the EU's strict state-aid rules, and be closely tied to goals such as improving the sector's environmental performance rather than no-strings-attached support. "What will not happen next week is a proposal for old-style subsidies," said an EU source involved in the dossier, declining to be identified because negotiations on the exact details of the package remained ongoing.

"Any support for the car sector would be targeted, temporary measures linked to certain objectives, not the dishing out of billions of old-style aid," the source said.

© 2008 Reuters