Global Economics

Germany Mulls Major Autos Bailout


In spite of EU commission concerns over protectionism, the German government plans to rescue carmaker Opel from bankruptcy with a 3.3 billion euro line of credit

The German government is considering a bailout of car maker Opel, adding to similar moves by the French, Spanish and Italian capitals despite concerns from the EU commission over protectionism and illegal state aid.

Berlin is ready to give Opel the option of a credit line but has ruled out a takeover of the car manufacturer's assets, Financial Times Deutschland has learned from unnamed government sources.

The funding is estimated to be worth €3.3 billion, with Opel hoping to get €2.6 billion from Berlin and the rest from regional authorities, since four federal states host Opel plants.

A company restructuring plan will be presented on Friday. Government spokesman Thomas Steg said "no blank cheques" will be given and that any potential aid depends on the feasibility of the plan.

This weekend, German tabloid Bild reported that Opel, which employs 25,000 people, will go bankrupt by May or June if no state aid is forthcoming, as car sales slump all over Europe.

With general elections coming up in autumn, social-democratic ministers have openly backed state aid, while conservative chancellor Angela Merkel has been more reserved so far.

Social-democratic finance minister Peer Steinbrueck told ARD public television on Sunday it would be "more logical" to provide state aid to Opel workers than to pay unemployment benefits and lose tax revenues.

Frank-Walter Steinmeier, the current socialist foreign minister who is to run against Ms Merkel, on Saturday appealed for international aid.

"We have to look further than our own backyard. No car factory is capable of surviving alone in Germany or elsewhere," he told the daily Rheinische Post.

State aid schemes for ailing domestic car industries have also been developed in France, Spain and Italy, sparking criticism from the European Commission and the Czech EU presidency.

On Friday, the commission said it is "concerned" over Italian measures approved, which provide state aid to companies producing cars, motorbikes and household appliances if they sign a deal with the government first.

"This could be discriminatory if [the aid] is not available to produce from companies which have not signed the protocol," commission spokesman Jonathan Todd said.

Spain has also been asked to provide more information on a car aid plan valued at €4.1 billion, with the deadline for the Spanish answer due on Tuesday.

France's €7.8 billion car aid scheme is currently being analysed by the commission's services, Mr Todd said, adding it could be illegal."

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