EU announces easing of state aid rules because of credit crunch

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Commission said it was relaxing EU state aid rules until the end of 2010.

BRUSSELS - The European Commission said on Wednesday it was relaxing EU state aid rules until the end of 2010 to help companies secure crucial financing in the face of a credit crunch.

Under the changes, member states can grant companies a lump sum of 500,000 euros (705,000 dollars) per company over the next two years to help them cope with the lack of credit.

Governments will also be able to provide loan guarantees with reduced premiums as well as soft loans, particularly if they are for producing environmentally friendly products.

Rules on how much venture capital can be provided by the state will also be loosened to allow for aid of up to 2.5 million euros for small and mid-sized firms, up from 1.5 million euros previously.

"These changes are justified given the exceptional economic conditions," EU Competition Commissioner Neelie Kroes told journalists in Brussels.

"But given that these are temporary circumstances, today's measures must also be temporary and are foreseen only until the end of 2010.

"Following detailed discussions with a number of national governments I have every confidence that the economic situation will have improved sufficiently by then to allow a return to the previous rules," she said.

Accused by some EU governments for being too "bureaucratic" and slow, the commission last week softened its rules for approving state bailouts for embattled banks.

The new easing of state aid rules met with a cold reception from the UEAPME association representing small and mid-sized businesses at the European level, which voiced fears the changes would only distort competition.

"It is now up to member states to ensure that aid goes to the enterprises suffering because of the crisis and not to those that are in difficulty due to structural problems and overcapacity," UEAPME's Secretary General Andrea Benassi said.

"However, our experience shows that this is rarely the case. Put simply, the commission has given member states a licence to burn taxpayers' money today," he added.


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