EU says French bank rescue plan needs checking

The EU rejected media reports that it sought to stop the French financial rescue package.

Spokesman Jonathan Todd said regulators wanted to make sure the French money for banks "would be used to give loans to the real economy" instead of reducing the costs banks face to increase their own capital reserves.

European Union regulators have been slow to clear France's emergency euro40 billion (US$51 billion) fund to give French banks extra liquidity--one of many plans European governments have put forward since October to shore up banks and help loosen lending after a crisis of confidence froze bank lending.

EU spokesman Johannes Laitenberger rejected reports in French newspapers that an overzealous European Commission wanted to stop the plan over worries that it would unfairly enrich French banks.

The EU's executive polices rules on how much money governments can give companies to make sure massive state subsidies don't damage competition with businesses elsewhere in the 27-nation bloc.

"There is no blocking," Laitenberger said, reading out comments by EU Commission President Jose Manuel Barroso. "We are looking at the dossier with all the necessary urgency and rigor."

He said the EU could decide as soon as this week on either the rescue plan or the controversial sale of most of troubled Belgian lender Fortis to France's BNP Paribas at a fire sale price.

Todd said it was "totally untrue" to suggest that regulators wanted to alter the French plan to reduce how much money they lend out.

"There is absolutely no objection whatsoever from the Commission if lending increases," he said.

Talks are continuing between EU and French officials about how the French package could be altered to meet EU rules.