Page last updated at 15:30 GMT, Friday, 21 November 2008

EU warns against car subsidy race

Neelie Kroes
Neelie Kroes believes car makers can use existing EU aid mechanisms

EU Competition Commissioner Neelie Kroes has told France and Germany not to start a "subsidy race" with the US to save the car industry.

She said the European Union's existing mechanisms could help automakers, hard hit by falling demand.

General Motors has been seeking support from the German government for its local subsidiary, Adam Opel GmbH.

On Thursday the Congress told US carmakers to present a recovery plan if they want a $25bn (17bn) rescue.

Poorly-handled subsidies would not solve the car industry's problems, Neelie Kroes said.

However, she added that auto makers could benefit from the European Union's funds for research and environment.

European car makers have been reportedly seeking loans of up to 40bn euro (33.6bn) , at preferential interest rates, to support production.

GM is demanding state aid from the five German states where it manufactures its European brand, Opel, which sells under the Vauxhall badge in the UK.

New car sales in Europe fell by 14.5% in October, the sixth monthly fall in a row, according to Acea, the European carmakers' association.

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