EU preparing green help for ailing car industry

(STRASBOURG) - The European Union is preparing targeted action rather than an overall bailout to help the auto sector, one of Europe's biggest employers that is in crisis as the credit crunch bites.

The auto sector has become the second front in the economic battle being waged, after EU member states made large-scale rescue efforts to aid Europe's worst-hit banks.

However officials in Brussels want to make sure the aid is closely targeted and eco-friendly.

"There won't be subsidies, and besides the industry is not asking for subsidies," EU Industry Commissioner Guenter Verheugen said a week ahead of the presentation of an economic relaunch plan in Brussels, which will include measures to help the auto industry.

The European Automobile Manufacturers' Association (ACEA) last month called for 40 billion euros (54 billion dollars) in loans, not grants, to develop green technologies.

Responding to this appeal, Verheugen called for the European Investment Bank (EIB) an increase its credit line "for makers of more eco-friendly cars".

The EIB, the EU's lending arm, is in favour of such a move and "we will take the decisions to introduce the move" next month, he added in comments to the European parliament in Strasbourg.

On Monday the EIB said it was ready to increase loans to Europe's ailing auto sector as part of a broader financing plan.

"The EIB will propose (to EU finance ministers) an increase of 20-30 percent, and that corresponds to 10 to 15 billion euros," more money for both 2009 and 2010 -- including help to small- and medium-sized businesses -- a spokesman for the Luxembourg-based bank told AFP.

Part of the money would be earmarked to help the transport industry, especially for the development of greener cars, the spokesman said, without giving an amount.

The EIB has handed out an average of two billion euros in loans to the automobile sector in the past three years.

That initiative followed the news that new car sales in Europe tumbled 14.5 percent in October as the global financial crisis plunged the eurozone into recession.

The European finance ministers will pronounce on the plan at their next meeting on December 2.

To allow this increase to go ahead EU nations will have to provide the European Investment Bank with "the necessary resources," said France's European Affairs minister, Jean-Pierre Jouyet, whose country holds the EU's rotating presidency.

The EU has committed to decreasing greenhouse gas emissions by 20 percent by 2020 and such funding could help achieve that, he added.

Verheugen also called for "ecological rigour," speaking of fiscal incentives to increase the demand for "green" vehicles.

However the commissioner also warned of the "cumulative effect" that the full range of European measures -- on safety, quality, emissions -- could have on car prices.

The commission, member states and the parliament must pay great attention to ensure that vehicles remain viable for consumers, he said.

The German EU commissioner also spoke in favour of "exceptional measures" to help out ailing German carmaker Opel.

His comments came as German solar energy company SolarWorld said it had prepared an offer for the four German auto factories owned by Opel, worth one billion euros (1.26 billion dollars), to create the "first green European car company."

Opel, a division of US giant General Motors, has asked Berlin to guarantee loans it might need if the US parent group goes bankrupt.

According to press reports Opel, which made its first car and 1899 and which GM has owned since 1929, needs up to two billion euros (2.5 billion dollars) in guarantees.