EU nations to consider soft loans for car sector

BRUSSELS, Belgium: EU nations will consider giving car makers soft loans to help them build more fuel-efficient vehicles as the region tightens standards on greenhouse gas emissions, French Finance Minister Christine Lagarde said Tuesday.

Sat Nov 08, 05:03 AM

EU car companies are seeking 40 billion euros ($52 billion) from governments so they can invest in green technology. They say slumping sales and tight credit markets make it hard for them to fund the switch to less-polluting cars themselves.

Lagarde did not mention a figure for any possible loans but said EU governments want to help the car industry and others pay for research and development and to boost the bloc's economies during the current slowdown.

Lagarde, who led talks involving European Union finance ministers on Tuesday, said the ministers had asked the European Investment Bank to allocate money for loans to R&D on climate change and energy, and wanted to see an EIB proposal next month.

The European Investment Bank is unlikely to suggest giving the car industry the full amount it wants.
The EIB is an EU-government funded bank that usually gives smaller loans to infrastructure projects, lending a total of €47.8 billion ($61 billion) last year.

European car makers want something similar to the U.S. government's $25 billion low-interest credit line for General Motors Corp., Ford Motor Co. and Chrysler LLC announced in September.

EU Industry Commissioner Guenter Verheugen said last week that he backed some kind of low-interest loans for the car industry, which is one of Europe's biggest employers. His support was unusual as the European Commission often opposes large subsidies to companies.

Lagarde said EU nations also were examining several ways of restoring credit lines for businesses and supporting the economy as it hits a sharp downturn. And she hinted that she was waiting for the European Central Bank to reduce borrowing costs in the 15 nations that use the euro currency at its next meeting on Thursday.

"We are holding our breath over the coming days," she said. "Clearly the reduction in underlying inflationary tensions does mean we could see some improvements or changes as regards interest rates in coming days," she said.

Source:http://www.iht.com/articles/ap/2008/11/04/business/EU-EU-Cleaner-Cars.php