Brussels signals new flexibility on bail-outs

The European Commission promised more flexibility in how it applies state aid rules to banks hit by the credit crisis on Tuesday after governments lashed out at the difficulties in getting EU approval for bail-outs. Brussels officials insisted there was no need to suspend the state aid regime as a result of the growing economic crisis because the rules were preventing a destructive subsidy race between member states in the 27-country bloc as they try to repair their banking sectors. But Neelie Kroes, EU competition commissioner, promised to issue fresh guidelines shortly on the application of the rules, drawn up in 1957 as part of the founding Treaties of the European Communities. The guidelines, she said, would distinguish between the financial conditions of the banks involved and give greater flexibility over what incentives can be used to make sure government assistance is repaid.

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