EU to investigate Northern Rock rescue plan

12.00.00am BST (GMT +0100) Wed 2nd Apr 2008

An in-depth investigation into the Northern Rock rescue plan was today launched by the European Commission to examine its compatibility with EU state aid rules. It gives all interested parties the right to comment.

Sharon Bowles MEP, Liberal Democrat European Economics Spokesperson said,

"It is right that the Competition Commissioner scrutinises the rescue plan in detail so as to ensure it does not run counter to state aid rules and the fair competition principles of the single market. By opening this up for external comment, concerned parties have an opportunity to air their views. It does need to be clarified whether there are unintended, but nevertheless unfair consequences."

Only a month ago the Commission launched a similar investigation into the German government's bail out of German banks IKB and Sachsen LB.

"There may be concerns that Commission approval will set a precedent that will allow national governments to shelter/protect national champions, particularly in the current financial climate. Of course we must not give a green light for protectionist reactions across the EU, which is why a thorough and proper investigation is essential. There is a mechanism to allow rescue aid under EC law that we must ensure it is used correctly not as an excuse for unfair government intervention. It may be that some restrictions to prevent aggressive seeking of market share have to go hand in hand with intervention".

"I am sure there will be a lot of "interested parties" wishing to comment. The lodging of a complaint by the Danish Banking Association two weeks ago has already been well documented in the press. I doubt it will be the last."

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