Strasbourg February 19th -- A leading Conservative has said that it is 'inconceivable' that the European Commission will allow Northern Rock to continue to operate after nationalisation on a 'Business as Usual' basis, as claimed yesterday by Chancellor Alistair Darling.
Jonathan Evans MEP, Conservative spokesman on Economic and Monetary Policy, said:
"Labour's Northern Rock nationalisation could soon fall foul of the EU's state aid rules - jeopardising the Chancellor's 'business as usual' claim. The Chancellor's statement is completely incompatible with the operation of a free, fair market in mortgage banking. Labour must get state aid clearance by March 17th but Commissioner Neelie Kroes stands in their way.
"The European Commission has a clear responsibility to other mortgage banks to maintain fair competition. Northern Rock is currently able to offer market leading interest rates to investors guaranteed by the British taxpayer, which is a clear distortion of the mortgage banking market."
Mr Evans added: "Northern Rock will be an early test of Commissioner Kroes's determination. State Aid should be short term, and based upon a fundamental restructuring of the business, which does not distort competition."
Jonathan Evans is this year leading the European Parliament's monitoring of the work of Commissioner Kroes and the Competition & State Aids directorate. He is a former UK Corporate Affairs Minister, a role in which he dealt with the fundamental restructuring of the Lloyd's Insurance market in the 1990s. He has also held leading Board positions with major UK financial services companies.
Notes:
On 26th November 2007 the European Commission authorised, under the EC Treaty’s rules on state aid, the UK authorities' package of measures to support Northern Rock. The Commission concluded that the measures comply with EU rules on rescue aid. The approval of the rescue aid measures has no bearing on whether nationalisation will be similarly approved.
The November decision found that certain measures were not State aid in the sense of Article 87(1) of the EC Treaty, and that the other measures which were State aid were compatible with the common market under the rescue aid provisions of the Under Community Guidelines on State aid for rescuing and restructuring firms in difficulty, rescue aid measures are limited to 6 months while a longer term plan is worked out. They may be extended while State aid involved in a restructuring plan is examined by the Commission. The UK authorities have to deliver their plan to the Commission by 17 March 2008.
State aid law requires, in particular, a plan assuring long-term viability, while avoiding distortions of competition. State aid must be limited to the minimum financial input necessary.