THE EUROPEAN Commission has cleared a €21 billion recapitalisation scheme for French banks after setting out new rules on how governments should grant aid during the financial crisis.
However, EU competition chief Neelie Kroes insisted that she would not be approving every scheme put before her, and denied that the commission had caved in to pressure from EU member states on the issue.
"It doesn't mean that I can accept every plan cobbled together on a cocktail napkin and posted to Brussels. I have insisted on changes to a great many schemes and a great many individual rescues put before me - changes that ensure taxpayers' money is well spent and give the rescues a greater chance of working, and keep us away from a 'better thy neighbour' policy."
Ms Kroes said she approved the French scheme after getting assurances that the banks involved would be charged higher repayment fees and be encouraged to leave the scheme as soon as possible.
She also said she expected the German government to make "minor" adjustments to its rescue scheme for Commerzbank to ensure that it complies with a previous aid package approved by the EU in October. The commission is set to approve Austrian aid for its financial sector very shortly.
The EU has already approved 24 national rescue plans, and is reviewing 20 more. The amount of money cleared is close to €100 billion, said Ms Kroes, adding that the commission's work is "not a simple rubber-stamping exercise".
"The European Commission is not an army of bureaucrats trying to annoy member states, not at all," she said.
"We are engaged in a proactive process to help member states design state aid schemes for banks in the best way, to make sure the national interest is in line with the European interest and that the internal market is preserved."
The commission's latest guidelines on state aid, which were published on Monday and build on an October 13th paper, distinguish between "fundamentally sound" and "distressed" banks, requiring national governments to charge higher repayment fees when injecting capital into riskier banks.
The average repayment rate for bailouts of fundamentally sound banks will be about 8 per cent under the new rules, which can be increased to encourage aid to be paid back as soon as possible.
The measures stress the need to ensure that state aid is not used to fund banks' expansion plans at the expense of their competitors and say aid should be passed on in loans to companies in the rest of the economy. The EU is to announce new measures on targeted aid this month, which will include an increase in the maximum threshold above which EU countries need to notify Brussels of intended bailouts.
