EIB Proposes More Loans to EU's Troubled Auto Sector

Nov. 17, 2008
Part of money aimed at development of greener cars

The European Investment Bank (EIB), the EU's lending arm, on Nov. 17 proposed to increase loans to Europe's ailing auto sector as part of a broader financing plan. "The EIB will propose (to EU finance ministers) an increase of 20-30%, and that corresponds to 10 to 15 billion euros," more money for both 2009 and 2010 -- including help to small- and medium-sized businesses -- a spokesman for the Luxembourg-based bank said.

Part of the money would be earmarked to help the transport industry, especially for the development of greener cars, the spokesman said, without giving an amount.

The initiative comes days after the announcement that new car sales in Europe tumbled 14.5% in October as the global financial crisis plunged the eurozone into recession.

The EIB has handed out an average of two billion euros in loans to the automobile sector in the past three years. Last month, the European automakers association ACEA called for 40 billion euros in loans to finance cleaner cars.

European Commission chief Jose Manuel Barroso said on Nov. 14 that the EU is ready to take action at the World Trade Organization if it judges that U..S aid for its struggling auto industry is "illegal."

The U.S. Congress approved an aid package worth $25 billion in September to help the auto industry invest in new generation technology but no timetable was fixed for payments to be made. Meanwhile, European automakers -- who have cast an envious eye at the U.S. plan and called for similar action at home -- have been forced to close factories and cut jobs.

Auto sales by European giant Volkswagen slumped by 5.1% in October, figures showed on Nov. 17. Meanwhile German rivals BMW and Daimler posted sales decreases of 8% and 18% respectively in October.

In September, the EU decided to increase EIB loans to small- and medium-sized businesses as the credit crunch bites ever deeper into the underlying economy.

Copyright Agence France-Presse, 2008

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