EU challenges French-backed Peugeot rescue -report

PARIS Thu Dec 20, 2012 3:41pm EST

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PARIS Dec 20 (Reuters) - The European Union is challenging the terms of a French government-backed debt rescue for carmaker PSA Peugeot Citroen's financing arm, Les Echos reported.

In a letter to the French government, EU Competition Commissioner Joaquin Almunia said the state-orchestrated refinancing of Banque PSA Finance constituted state aid, the French daily said in a preview of its Friday edition.

Peugeot had no immediate comment, a company spokesman said. French government and EU officials did not immediately return calls seeking comment.

A state aid probe by Brussels could ultimately increase the cost to Peugeot of a 7 billion euro ($9.3 billion) state loan guarantee granted in October and an 11.5 billion euro refinancing deal to be finalized with creditors next month.

The EU objections follow a formal complaint received by Brussels from an unidentified Peugeot competitor, according to the paper.

($1=0.7555 euros) (Reporting by Laurence Frost; Editing by Peter Galloway)