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EU launches probe Germany rescue of Hypo Real Estate

  The European Commission launched an in-depth investigation on Thursday into state support measures for German bank Hypo Real Estate.

The commission, the European Union’s competition guardian, said it would examine whether the measures will ensure the company’s long-term viability and avoid distorting competition.

“In view of the difficult situation of Hypo Real Estate and the large amount of aid involved, the commission has decided to carry out an in-depth investigation into the aid package for Hypo Real Estate in order to ensure legal certainty and allow interested third parties to give their views,” Competition Commissioner Neelie Kroes said.

Hypo Real Estate, headquartered in Munich, is a major victim of the financial crisis in Germany. Berlin has granted €102 billion ($136 billion) of credit lines and debt guarantees to keep it afloat.

Germany notified in April a restructuring plan for Hypo Real Estate. The notification temporarily extends the legality of a previous €35 billion ($46.6 billion) state guarantee.

The commission said the detailed investigation would evaluate whether the planned measures are capable of restoring the long-term viability of the bank, whether state support is limited to the minimum necessary and whether measures should be put in place to minimize potential distortions of competition created by the aid.

The decision came after the German government’s Soffin fund raised its stake in Hypo Real Estate to 47.3%, moving closer to gaining control of the commercial real-estate lender.

The commission said its probe would also cover the deal and the prolongation of another €52-billion ($69.2 billion) guarantee granted under the German banking rescue scheme.

It added the opening of an investigation is common for state interventions of this magnitude and will ensure legal certainty for the companies concerned. (Xinhua)