/ 27 November 2007

Britain seeks EU approval for Northern Rock aid

Britain has asked the European Commission to approve the aid it has provided to struggling mortage lender Northern Rock, a Commission spokesperson said on Tuesday.

”Last night [Monday], the British government notified us,” EU competition spokesperson Jonathan Todd said.

The move came hours after European Competition Commissioner Neelie Kroes met British Finance Minister Alistair Darling.

”In the meeting, the commissioner said the sooner they notified the details of the aid, the sooner we can look at it in detail and we will try come to a decision as soon as possible,” Todd said.

The British government has lent Northern Rock an estimated £25-billion ($52-billion) since the lender ran into financial difficulties in September, as credit markets dried up.

A consortium led by Richard Branson’s Virgin Group has been declared the preferred bidder for Northern Rock, with a promise to repay the government £11-billion immediately on the sale going through.

Under EU rules, governments are allowed to offer rescue aid to ailing companies under strict conditions, or restructuring aid on condition that the company undergo sufficient restructuring that it does not require further assistance.

In both cases, the aid must be approved by the European Commission, Europe’s top competition regulator. Aid judged illegal has to be repaid to the government. – Reuters