EU Concerned Over Scope Of Irish Bank Deposit Guarantees

BRUSSELS -(Dow Jones)- The European Commission Monday said there are concerns that the scope of the Irish government's bank deposit guarantees goes beyond what the commission considers acceptable under its rules on admissible state aid.

In general, the commission considers retail deposit guarantees to be acceptable as they are unlikely to "give rise to distortions in competition," the commission's spokesman Jonathan Todd said.

However, in the case of Ireland the guarantees are extended beyond retail deposits, and the commission is looking into that. The Irish government is still in the middle of sorting out the finer print, so it's too early for the commission to take any decisions, Todd said.

In the case of the German and Danish bank guarantees, the commission will assess them under the state aid rules as soon as they have been notified, Todd said.

The commission's chief spokesman Jonathan Leitenberger added that the commission would continue to apply its state aid rules in a "flexible way" to ensure that they were the correct tool to address the current financial crisis.

State aid rules "cannot stand in the way" of sensible market-oriented rescues, Leitenberger said. They are "designed to provide for flexibility in exceptional circumstances. And that is what's happening," he added.

-By Peppi Kiviniemi, Dow Jones Newswires; +32 (0)2 741 1483; peppi.kiviniemi@dowjones.com

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October 06, 2008 07:37 ET (11:37 GMT)


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