(BRUSSELS) - Britain's Northern Rock bank must shrink, the European Commission said Tuesday, as it began examining details of a government restructuring plan for the ailing mortgage lender.

A spokesman for the commission said the EU's executive arm had also received a letter from Danish banks complaining about the British state bailout of Northern Rock, which was ravaged by the global credit crunch.

"We have recieved the notification of the restructuring plan ... and we will study it carefully," Commission spokesman Ton van Lierop said.

"To be viable without state guarantees it is clear that the bank must shrink," he added.

His comments came shortly after Northern Rock announced it would shed more than 2,000 jobs or about a third of its workforce by 2011.

The result will be a "smaller, more focussed, financially viable mortgage and savings bank," it said in a statement.

The British government "sent the European Commission the necessary formal notification of its intention to continue to provide the existing restructuring aid to Northern Rock to support this process," the statement added.

The group said it expected to pay back some 24 billion pounds (48 billion dollars, 30.6 billion euros) to the Bank of England over the next three or four years.

"The commission is not asking for redundancies, it is only checking whether the large state aid currently given to Northern Rock is acceptable to restructure the bank," said van Lierop.

He added that the Northern Rock restructuring plan "will have to prove that the bank will become viable" and it should hand back at least half of the state aid given.

The EU's executive will also verify "that competition distortions from the state aid will be limited to the minimum possible."

Northern Rock was brought to the brink of collapse last September when it could not raise funds on global credit markets in the wake of the crisis in the US subprime or high-risk home loan sector.

Last month, British finance minister Alistair Darling announced that the bank would be temporarily nationalised, arguing that two private sector bids were not in the best interests of the taxpayer.

In December, the European Commission authorised state aid for the bank on condition that it did not last longer than six months from the first handout on September 17.

Given the complexities of the case it was deemed likely in Brussels that the commission would launch a full-scale enquiry into the state aid afforded to Northern Rock.

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