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UPDATE 2-EU sees problems with Austrian bank package

Thu Nov 6, 2008 10:38am EST

Stocks

   

* Erste Bank tapped rescue package for 2.7 bln euros

* EU also requests details of Germany's Commerzbank deal

* Erste shares down 6.1 pct, Commerzbank down 9.5 pct

(Adds Austrian finmin, other Austrian deals)

By Pete Harrison

BRUSSELS, Nov 6 (Reuters) - European Competition Commissioner Neelie Kroes signalled on Thursday possible concerns about deals agreed under Austria's 100 billion euro ($129 billion) package to support its financial sector.

Kroes said in a briefing she was in touch with Austrian Finance Minister Wilhelm Molterer to get more information to assess the package and a deal in which Austria last week agreed to inject 2.7 billion euros into Erste Group Bank (ERST.VI).

Asked if the terms of the Erste deal -- for instance the 8 percent interest the bank is supposed to pay for the state capital -- were a problem, Kroes said: "Yes, that could be a problem, we need more information to give the final answer."

Austria's finance ministry said that it kept Brussels informed about its plans but that it had so far only agreed the framework of the capital injection into Erste, not a detailed contract with all terms of the deal.

Spokesman Harald Waiglein said that the measure was modelled on French deals and that the ministry was confident that it complied with competition rules.

The Erste deal is different from others, including a bailout of Austria's Kommunalkredit [KKAL.UL] agreed on Monday, in that Erste was well-capitalised and funded and said it needed the capital mainly to stay competitive.

Erste peer Raiffeisen Zentralbank, parent of Raiffeisen International (RIBH.VI) earlier this week asked shareholders to allow it to take up to 2 billion euros of Austrian state funds in a deal likely to be similar to Erste's.

Kroes also said she needed more information about Germany's capital injection into Commerzbank (CBKG.DE) to give her final assessment.

Germany's 8.2 billion euro capital injection into Commerzbank pays 8.5 percent interest on one tranche and 5.5 percent on the second, which has been criticised by the EU as being too cheap and potentially distorting competition.

Shares in Erste dropped 6.1 percent to 19.53 euros by 1517 GMT, while Commerzbank dropped 9.5 percent to 8.83 euros, both underperforming the DJ Stoxx European bank index .SX7P. (Additional reporting and writing by Boris Groendahl; Editing by David Cowell)



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