EU carmakers closer to CO2 loans

The European car industry wants to be competitive with the US

The European Union (EU) has backed the possibility of granting carmakers on the continent loans at attractive rates in the wake of the economic downturn.

Carmakers have requested 40bn euros ($50.98bn; £31bn) to help develop cars which meet EU CO2 emissions targets.

EU Industry Commissioner Guenter Verheugen said such loans made through the European Investment Bank (EIB) should now be accepted "in principle".

He had met executives from top firms such as Daimler and Peugeot Citroen.

The ACEA European carmakers' association had requested the loans to help them remain competitive in the face of plans to provide huge loans to their US rivals.

"The credit crunch makes it very difficult for the sector to finance operations and to sustain investment levels," said PSA Peugeot Citroen chief Christian Streiff, who is also head of ACEA.

"Consumers are increasingly hesitant to purchase cars. New car sales are below normal levels, in fact the lowest level in a decade," he added.