Barroso cautions France on bank bail-out plan

Paris, Dec 1 (DPA) European Commission President Jose Manuel Barroso Sunday suggested Brussels may veto France's bank bail-out plan, warning that any deviation from the European Union (EU) regulations could lead to 'the law of the jungle'.

Asked about a report in the Financial Times that the European Commission had blocked France's aid to its six largest banks, Barroso told LCI television, 'We are not blocking it. It is being thoroughly examined'.

On Friday, the Financial Times had reported that EU Competition Commissioner Neelie Kroes had rejected France's 10.5-billion-euro ($13.3 billion) plan because it would enable French banks to use public funds for commercial loans.

Without going into details, Barroso Sunday suggested that Brussels did have misgivings about the French proposal.

'The Commission's duty is to apply the rules. If the rules are not respected, you get the law of the jungle,' he said, noting that the EU was particularly wary of 'competitive distortions' being introduced into the European banking sector.

Under the French plan, the government would subscribe to subordinated five-year debt issued by the six banks. In exchange, the French banks would commit themselves to increasing their loans to individuals and companies by three to four percent in 2009.

The European Commission is worried that the public funds could be used to attract clients.