EU eyes auto aid but no blank cheques

By Mark John and Crispian Balmer

BRUSSELS/PARIS (Reuters) - The European Union is studying support for its ailing carmakers but the bloc's executive was divided on Tuesday over the extent of any aid as other sectors also face a downturn.

EU Industry Commissioner Guenter Verheugen signalled support for a German offer to help the Opel unit of stricken U.S. auto firm General Motors, but others in Brussels insisted there could be no special treatment for the auto industry.

"You cannot compare the car sector with the financial sector," Competition Commissioner Neelie Kroes said, referring to the mass bail-outs by EU governments last month of key banks in the wake of the financial crisis.

EU sources said the European Commission would propose ways of helping the auto sector in the 27-nation bloc next week as part of a broad package of economic stimulus measures to deal with the worst financial crisis in 70 years .

But any aid would be temporary, would have to meet the bloc's strict state-aid rules, and be closely tied to goals such as improving the sector's environmental performance rather than no-strings-attached support, the sources told Reuters.

"What will not happen on Wednesday (next week) is a proposal for old-style subsidies," said an EU source involved in the dossier, declining to be identified because negotiations on the exact details of the package remained ongoing.

"Any support for the car sector would be targeted, temporary measures linked to certain objectives, not the dishing out of billions of old-style aid ... Ecology is certainly an important element," the source said.

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