EU bails out German bank for $7.8 billion
(04-30) 04:09 PDT BRUSSELS, Belgium (AP) —
The European Union has approved a $7.8 billion bailout for Germany’s regional WestLB bank, which was rattled by it’s exposure bad U.S. debt.
The German regional bank had a net loss of 1.6 billion euros ($2.5 billion) last year, significantly higher than predicted because of the crisis. The state of North Rhine-Westphalia joined the rescue bid to help cover payment defaults. The EU Commission approved the package to protect the bank from volatile markets Wednesday.
“The Commission’s investigation found that the risk shield constitutes state aid, but that the aid is in line with EU rules” since the aid is limited in time and is reversible,” the EU said in a statement.
In February, the German state, WestLB’s biggest shareholders, moved to shield it from further subprime risks, reaching a deal to provide 3 billion euros ($4.67 billion) to help cover its risks in a struggling securities portfolio.
That came after the Duesseldorf-based bank said its original risk shield of 2 billion euros ($3.11 billion) would not be enough.
“The Commission has demonstrated again that it can move very fast in order to provide legal certainty and financial stability to banks in difficulty,” said EU Competition Commissioner Neelie Kroes.
State aid programs must be vetted by the European Commission to make sure it does not impede the rules of fair competition with the 27-nation EU.
Germany now has to present the Commission with a full restructuring plan by Aug. 8.
