Neelie Kroes, the EU Competition Commissioner, is right to be taking a hard line on state aid to banks, which will distort competition if not repaid. However, she will have to fight member states like Britain and Germany, which are desperately encouraging banks to lend locally, nursing large losses on their capital injections or trying to avoid massive upheaval in their banking industries.
Neelie Kroes is laying down the law. The European Union’s competition chief may be lenient on timing, but she is sticking rock-hard to the principle that institutions which get public money during the financial crisis must be shrunk, broken up, sold off or wound up to avoid distorting competition. That is the main message of guidelines for restructuring state-aided banks drafted by EU regulators and obtained by Reuters on Thursday.