Borg slams EU over bank aid reviews

Swedish finance minister Anders Borg openly called European Commission "bureaucratic” on Tuesday, saying the EU body’s approach to assessing state bailouts of troubled banks hasn’t helped frozen credit markets.

“We need to restore the credit channel. The commission has not been constructive,” Swedish Finance Minister Anders Borg said.

“I do think that we have to pull off these legions of state aid bureaucrats.”

In the face of the worst crisis in generations, many EU governments have rushed to prop up banks through measures ranging from nationalization to recapitalizations and loan guarantees.

The European Commission, the European Union’s state aid watchdog, has vowed to review state support for troubled banks more quickly than normal as well as be more flexible than usual.

However, Brussels has drawn fire for requiring too many guarantees that competition would not be stifled by the bailout plans.

“We need help from the European system to restore the credit system. I think we need to have a difficult debate today in order to push through a new proposal for the next EU summit,” Borg told a group of journalists, according to the TT news agency.

“We need to get credit flowing to households and business. Fiscal policy or monetary policy isn’t going to be enough if we don’t get the credit system working again. We have to get our priorities straight,” he said, adding that he thought there was a risk of “a huge policy mistake”.

German finance minister Peer Steinbrueck also echoed Borg’s criticism.

“You shouldn’t react to such a financial crisis in such a bureaucratic manner,” he said as he arrived for talks with his EU counterparts.

The commission’s misgivings over a massive capital infusion into German bank Commerzbank has grated on nerves in Berlin.

Over the weekend, a cloud of uncertainty hung over French plans to help troubled banks amid reports that Brussels was preparing to reject them, which it later denied.

EU Competition Commissioner Neelie Kroes, who is in charge of reviewing state aid, was to meet with EU finance ministers during their meeting in Brussels.