The European Commission has provisionally allowed
France to prop up the banking arm of ailing carmaker Peugeot with 1.2
billion euros (1.6 billion dollars) in state guarantees, the EU
executive announced Monday.
Banque PSA Finance is a subsidiary of PSA Peugeot Citroen, which must present restructuring plans for the entire business within the next six months under EU conditions for state aid, the commission said. Its final approval depends on these proposals.
Europe's second-biggest carmaker caused dismay in France last year when it announced plans to cut jobs and pare back production due to dwindling car sales in Europe.
The guarantee was necessary to ensure that Banque PSA Finance could continue to access the market, and to "avoid any contagion effect for the French banking system," the commission wrote.
It covers new shares with a three-year maturity, issued by Banque PSA Finance during the next six months.
Last month, a French court prevented PSA from cutting 8,000 jobs and closing an assembly plant, ruling that it had not consulted staff sufficiently over the restructuring plan.
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