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EU's Kroes says EU state aid rules prevent “chaos”

The European economy would “descend into chaos” without EU state aid rules, the bloc's competition chief said, quashing suggestions they could be suspended in the wake of the financial crisis.

“A jungle is what we would get if we suspended or abandoned competition policy,” EU Competition Commissioner Neelie Kroes said in a tough-worded speech to a conference in Brussels.

“We don't need this Wild West,” she said, adding that any suspension of competition rules would be “the recipe for chaos.”

The EU executive would very soon issue guidance on the application of state aid rules “giving member states clear lines to follow in shoring up the financial system in a way that works both for the economy and for the taxpayer,” she said.

There is growing concern in Brussels that EU states are ignoring the EU rulebook, notably concerning limits on state aid to the private sector, in their haste to react to the market turmoil and rescue banks.

The EU executive has agreed a number of emergency rescue plans including Britain's rescue of mortgage-lender Bradford & Bingley, and Denmark's state support scheme for banks, but has raised concerns about elements of others, notably the Irish blanket guarantee for all bank deposits.

Kroes has said she believed the Irish scheme needed only “fine-tuning” to be compatible with EU rules and Dublin has subsequently sought to address one concern by opening the guarantee to the activities of non-Irish banks. (Reuters)