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EU backs French carmakers’ aid package

British dealers of French-made cars can breath a sigh of relief in the knowledge their suppliers are not going to become a swift victim of the credit crunch. 

The European Commission has approved a €6.5 billion bail-out package drafted by the French government.

This had been highly controversial across the European Union (EU), because Paris had been planning to tie this support to a pledge not to close plants in France during the current slump and use French suppliers. 

Other EU governments and the European Commission had argued this was illegal under EU subsidy laws, which preclude member states from explicitly supporting their own industries to the possible detriment of those in other EU countries. 

In this instance, eastern European governments had opposed the package because they feared it would encourage Renault and Peugeot Citroën to close plants in their countries.

EU competition commissioner Neelie Kroes announced she was “satisfied with the guarantees…on the absence of protectionist elements in the plan for aid to the automotive sector” and declared the package in compliance with EU subsidy laws.

“This result shows the importance and the usefulness of a dialogue with the commission at the planning stage of national aid plans,” she said, adding: “It was important for the commission to remove all ambiguity…as Europe must avoid a return to protectionism”, which would destroy jobs in the long term, she stressed.

As a result, an emergency EU recession summit on Sunday focused more on how to kick-start European credit and financial markets and merely referred briefly to the auto industry in the summit communiqué, saying it favoured the “enhanced European co-ordination of schemes for the renewal of car fleets.” 

However, it called on the commission to closely monitor other bail-outs. 

Decisions on the legality of proposals made by Italy and Spain are still awaited from Brussels.

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