London/Paris - The European Commission is blocking the
French government's plan to bail out its six largest banks by
insisting that state funds can not be used for commercial lending,
Britain's Financial Times reported Friday on its website.
According to the report, EU Competition Commissioner Nellie Kroes
has rejected pleas by French Finance Minister Christine Lagarde to
approve the French 10.5-billion-euro (13.3-billion-dollar) plan.
The Financial Times quoted an unnamed EU official as saying, 'We
have to apply the same criteria to everyone ... support should be
sufficient to offset the negative impact of the current financial
crisis and no more.'
Kroes is objecting to the fact that French state funds would be
used to increase the banks' lending books.
In the French plan, the government would subscribe to subordinated
five-year debt issued by the six banks. In exchange, the French banks
committed themselves to increasing their loans to individuals and
companies by 3 to 4 per cent in 2009.
Lagarde said at the time that 'if market tensions persist' another
10.5 billion euros would be allocated to the banks for 2009.
A senior French government official was quoted as calling the
Brussels decision 'ridiculous' and 'stupid' because it would produce
the result that the aid was intended to prevent - the squeezing of
credit to households and businesses.
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