BRUSSELS, Belgium (AP) -- The European Union's competition chief said Friday that Germany and France should avoid entering a global "subsidy race" to bail out the ailing car industry.
EU Competition Commissioner Neelie Kroes said the current rules already allow for plenty of aid to car companies for research and environmental technologies.
She said governments should resist harking back to old-fashioned subsidy handouts to save jobs, as such national measures would only acerbate problems in other EU countries.
"The temptation may be greater now for member states to give subsidies that can result in their economic problems being exported to their neighbors, but that would only worsen the economic difficulties," said Kroes at a conference.
"All governments have to resist that," she said.
The European Commission will announce a package of proposals on how to deal with the financial meltdown next Wednesday.
In Germany, Bernhard Mattes, chief of Ford Motor Co.'s German unit, said he hopes the EU will help the ailing auto industry with a loan package.
"We support a euro40 billion ($50 billion) loan from the European Investment Bank for all European carmakers which will give us the possibility to achieve better efficiency and emissions standards faster," Mattes was quoted as saying in Friday's edition of Germany's Bild newspaper.
Germany is considering giving Opel euro1 billion ($1.25 billion) in state guarantees for loans that would reduce its borrowing costs while EU regulators are encouraging eco-friendly tax incentives to encourage buyers to pick less polluting vehicles.
EU Industry Commissioner Guenter Verheugen said early this week that some special measures are justified to keep troubled car maker Adam Opel GmbH in business, but only if it would make the whole car industry more competitive and environment-friendly.
There are fears that a collapse of the U.S. car industry could trigger a domino effect that could bring down other car companies in Europe, threatening an industry that directly employs some 12 million people.
In Washington on Thursday, Democratic leaders in Congress sidetracked legislation to bail out the auto industry and demanded the Big Three car producers develop a plan assuring the money would make them economically viable.
"I ask all governments to avoid the costly trap of a subsidy race," said Kroes. "I have seen comments on both sides of the Atlantic that "they" are going to give aid, so "we" should too. The car industry might want politicians to take that road, but the European economy and European taxpayers will be better off if politicians choose another, more effective, route."
