February 10, 2009 / 12:22 PM / 11 years ago

UPDATE 1-EU raises alarm on French auto aid, wants details

(Adds details, wraps German and Slovak concerns)

BRUSSELS, Feb 10 (Reuters) - The European Commission said on Tuesday a state rescue plan for the French auto sector could prompt legal concerns and announced that it had asked the French government to clarify details.

Separately, Slovakia said it would appeal to the Commission and other EU bodies if it emerged that French state loans to car giants PSA Peugeot-Citroen and Renault proved protectionist, while a senior German source said Berlin was concerned about a possible distortion of competition law.

“Today the Commission has written to the French authorities to ask for clarification of the plan,” Jonathan Todd, a spokesman for the European Union’s executive arm, told a regular briefing.

“We have not actually reached any conclusions as regards the French measures. We have a few concerns with what we saw in the press,” he said.

“If there were any conditions ... which would mean that aid would be subject to conditions that violated the principles of the internal market ... then the aid would be deemed to be illegal and the Commission would not tolerate that,” he said.

The plan unveiled on Monday would see the French government lending the two car makers 3 billion euros ($3.9 billion) each over five years at 6 percent interest in return for a pledge not to close sites during the duration of the loan.

Such a measure would have to comply with EU law in at least two areas: rules concerning state aid, and rules on the EU single market guaranteeing companies the right to set up and do business wherever they want in the bloc.

French President Nicolas Sarkozy last week raised hackles in the Czech Republic and Slovakia by suggesting in an interview that French companies in receipt of aid should not then relocate to cheaper countries.

“We were very disturbed by this statement,” Jan Pociatek said after a meeting of EU finance ministers in Brussels.

“We will act at a proper level,” he told reporters, adding that this meant his government could seek recourse to the Commission or at the EU Council of Ministers.

Concerns were also heard in Germany.

“We need to ensure that no one gets a competitive advantage,” a senior German government source told Reuters on Tuesday, speaking under condition of anonymity.

“Nothing should be approved which contravenes EU support guidelines,” the source added.

The Commission spokesman promised fast study of the matter.

“The Commission is regarding this as an urgent matter so we hope we will be able to draw conclusions as soon as possible,” he said, without specifying a deadline. (Reporting by Ingrid Melander, Marcin Grajewski and Bate Felix in Brussels, Rene Wagner in Berlin, writing by Mark John, editing by Dale Hudson)

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