EU aid rules to stay in 2011
Source: Agencies |
December 2, 2010, Thursday
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Print Edition
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EUROPEAN regulators yesterday extended into 2011 the more lenient rules on state aid for banks and companies they introduced during the financial crisis, suggesting officials remain wary of the repercussions on banks of the government debt crisis ravaging the region.
"After almost two years of a specific crisis state aid regime, we need to prepare a gradual return to normal market functioning," said European Union Competition Commissioner Joaquin Almunia. However, he cautioned that "the remaining risk of renewed stress is a valid reason to proceed with care and caution in the exit process."
Almunia said he hoped that the commission could return to the normal rules on state aid for banks by 2012, but warned that it was "still too soon" to give an exact date.
"I cannot anticipate because nobody can assure that the normal conditions in the financial markets will be completely re-established by the end of next year," he said.
The EU's competition commission temporarily loosened some rules on state aid after the collapse of Lehman Brothers in 2008.
Between October 2008 and October 2010 the commission approved 4.59 trillion euros (US$6.02 trillion) in state aid for the financial sector, it said. The overwhelming majority of that aid, 3.94 trillion euros, was given in the form of loan guarantees.
Most of these guarantees haven't been used, and thus don't cost the taxpayer anything, but the Ireland case has shown what happens when banks suddenly are no longer able to repay their guaranteed loans.
EU officials agreed on Sunday on 67.5 billion euros in bailout loans in an attempt to keep market fears about Ireland's financial stability from spreading to other countries in the currency union.
"After almost two years of a specific crisis state aid regime, we need to prepare a gradual return to normal market functioning," said European Union Competition Commissioner Joaquin Almunia. However, he cautioned that "the remaining risk of renewed stress is a valid reason to proceed with care and caution in the exit process."
Almunia said he hoped that the commission could return to the normal rules on state aid for banks by 2012, but warned that it was "still too soon" to give an exact date.
"I cannot anticipate because nobody can assure that the normal conditions in the financial markets will be completely re-established by the end of next year," he said.
The EU's competition commission temporarily loosened some rules on state aid after the collapse of Lehman Brothers in 2008.
Between October 2008 and October 2010 the commission approved 4.59 trillion euros (US$6.02 trillion) in state aid for the financial sector, it said. The overwhelming majority of that aid, 3.94 trillion euros, was given in the form of loan guarantees.
Most of these guarantees haven't been used, and thus don't cost the taxpayer anything, but the Ireland case has shown what happens when banks suddenly are no longer able to repay their guaranteed loans.
EU officials agreed on Sunday on 67.5 billion euros in bailout loans in an attempt to keep market fears about Ireland's financial stability from spreading to other countries in the currency union.
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