EU continues to relax rules on state aid amid debt crisis

The European Commission said on Wednesday it would continue to relax rules on state aid so as to support struggling banks and companies during the debt crisis.

The temporary and more lenient rules, introduced during the financial crisis to give a freer hand to European Union countries in providing state aid to firms in difficulty, would be extended into 2011, the EU's executive arm said.

Joaquin Almunia, commission vice president in charge of competition policy, said the extension was justified by the fact that the situation in the financial markets remained fragile as a sovereignty debt crisis was spreading in the euro zone.

But the extension was coupled with stricter conditions. As of Jan. 1, every bank in the EU having recourse to state support in the form of capital or impaired asset measures would have to submit a restructuring plan.

Until now the requirement was limited to distressed banks, namely banks that received support above two percent of their risk-weighed assets.

Source: Xinhua