Northern Rock must 'shrink' warns EU
Northern Rock will have to “shrink” if it is to remain afloat without state aid, the European Commission warned this afternoon.
The Commission spokesman said Brussels was not calling for redundancies at the troubled bank but was trying to establish whether levels of government financial support were in line with EU rules on state aid.
The comments came after the Treasury yesterday met a deadline for submitting to the Commission its long-term business proposals for the bank’s survival.
The Commission has already approved short-term emergency aid and is now expected to open a formal inquiry into the next stage of UK government efforts to save the bank.
“To be viable without state guarantees it is clear the bank must shrink. We are not asking for redundancies – we are simply checking as to whether the large amount of state aid is acceptable,” said the spokesman.
The remark signalled that the price of the Commission endorsement of the government’s long-term plans will be a scaling back of Northern Rock operations, possibly including the loss of its 6,500 employees.
The Commission has already received formal complaints from Danish banks about alleged unfair competition in the European banking sector because of levels of national aid being pumped into Northern Rock.
