EU Says Not Blocking French Bank Capital Plan

`There is no sort of blockage,` said Jonathan Todd, spokesman for EU Competition Commissioner Neelie Kroes

The European Commission denied a report on Saturday that it was blocking a French plan to shore up the capital positions of big retail banks, saying it was working with Paris to get it approved as soon as possible.

"There is no sort of blockage," said Jonathan Todd, spokesman for EU Competition Commissioner Neelie Kroes, adding that the latter had spoken to French Economy Minister Christine Lagarde about the issue on Friday.

"They both agreed to pull out the stops to resolve the situation as quickly as possible," he said.

France announced last month that it would lend 10.5 billion euros ($13.6 billion) to the country's six top lenders before year-end to prop up their capital reserves.

Saturday's Financial Times reported that the EU executive was blocking the plan, insisting that banks must reduce their lending in return for state support.

Paris has argued that without state support, lenders would have shored up their capital positions by reducing loans in the face of malfunctioning interbank lending markets, a move that would deal a fresh blow to an already troubled economy.

The Financial Times said Lagarde had tried to persuade Kroes to lift her veto on France's bank support package, but Kroes stuck to her view that banks cannot use state aid to increase their lending books.

"We have to apply the same criteria to everyone ... support should be sufficient to offset the negative impact of the current financial crisis and no more," the paper quoted one official as saying.

The French government had reacted furiously to the Commission's argument, the paper said, adding that one senior official had described it as "ridiculous" and "stupid" because it would exacerbate the credit crunch.

Speaking to reporters during a visit to Doha in Qatar, Sarkozy ruled out any suggestion that the commission might wish to scupper the French plan.

"I expressed my views to (European Commission President) Barroso yesterday on the telephone and I don't think there is such a wish on the part of this or that commissioner. Everyone needs to realise that the world has changed and that it is necessary to move quickly," Sarkozy said.