European Commission approves Spanish financial rescue package

Business Materials 4 November 2008 21:40 (UTC +04:00)

The European Commission on Tuesday approved a Spanish plan aimed at stabilizing its financial markets by providing liquidity to lenders in need, dpa reported.

The approval follows lengthy discussions between Madrid and Brussels over the exact scope of the plan.

"Thanks to extensive and fruitful cooperation between the Spanish authorities and the commission, the Spanish fund for acquisition of financial assets has been properly designed to boost market confidence and avoid distortions of competition," said EU Competition Commissioner Neelie Kroes.

A first draft of the Spanish plan, which involves a government-sponsored fund purchasing assets of troubled institutions, was submitted to the commission on October 10.

However, it was only cleared after the Spanish government submitted on Monday a list of commitments limiting possible distortions of competition.

The EU's executive arm had already approved similar plans put in place by France, the Netherlands, Germany, Britain, Ireland, Denmark, Portugal and Sweden.

According to EU rules, any financial rescue package must be limited in time and scope and must not discriminate against foreign- based banks operating in the country.

State guarantees must cover only new debts, beneficiaries must pay a fee derived from market prices, while state money cannot be used by banks or insurance companies to attract new business.