Subsidies boost European car sales

By Manuel Maria Ruiz and Helen Massy-Beresford

MADRID/PARIS (Reuters) - New car sales improved in France, Italy and Spain in June, thanks to government subsidies aimed at giving life support to the automotive industry during the economic crisis.

French new car sales rose 7.1 percent in June from a year earlier and in Italy rose 12.4 percent, with orders in the country rising 9 percent. In Spain the rate of sales decline eased to 15.9 percent last month from 38.7 percent in May.

In Spain, economists said that the economy could be showing signs of hitting the bottom of its deep recession, but industry associations in both France and Spain worried sales could slump again once government subsidies run dry.

A major car dealer in Britain last week also credited a recently-introduced scrappage scheme for boosting sales.

As of mid-June, around 200,000 new car registrations in France, or 20 percent of the total, were linked to a scheme offering cash payments for traded-in old vehicles, Xavier Fels, president of industry group CCFA, told a press conference.

Italy's car sales showed their first growth year-on-year since incentives were reinstated in February.

Spanish car sales were still around half the levels recorded before the financial crisis and the collapse of a housing bubble shoved the country into a recession expected to slice about 4 percent from national output this year.

"What is probably happening is that the economy has fallen to such depths that it is beginning to stabilise at low levels," said Nicolas Lopez, of M&G Valores in Madrid.