BRUSSELS, Sept 16: The European Commission clashed with Germany on Monday over whether a government rescue plan for troubled telecoms operator MobilCom was state aid requiring European Union approval.

Chancellor Gerhard Schroeder’s left-wing government, fighting a general election next Sunday, announced on Sunday 400 million euros ($391 million) in soft loans from state banks for MobilCom to try and avert insolvency for the firm, fuelling a 250 per cent opening rally for Mobilcom shares.

“This will have to be notified for examination on the basis of rules for rescue and restructuring aid,” the EU executive’s competition spokeswoman, Amelia Torres, told a news briefing.

“We’re talking about state guaranteed loans, therefore state intervention. This is not money for research and development, this is rescue aid. State intervention business needs to be examined by the European Commission. The German government needs to get in touch with us,” she told reporters.

But the German Economy Ministry defiantly said it did not have to notify Brussels of the 400 million euros ($391 million) in soft loans from state banks, arguing it was not state aid.

“It is a normal bank credit,” a ministry spokesman told Reuters.

MobilCom, which employs 5,500 people, risks insolvency after its indebted partner France Telecom cut off vital funding last Thursday, precipitating a liquidity crisis.

Torres said EU rules required loans to be granted at market interest rates and followed within six months by a long-term restructuring plan.

EU officials said they based their comments only on media reports of the package, since the Berlin authorities had not yet been in touch with Brussels.

However, they said the fact that the loans were being granted by the state-owned Kreditanstalt fuer Wiederaufbau bank and the regional state bank where MobilCom is based, the Schleswig-Holsteinische Landesbank, made them clearly subject to notification.

Schroeder, who has overtaken conservative challenger Edmund Stoiber in the latest opinion polls, has repeated attacked the European Commission in recent months for alleged bias against German industrial interests. Brussels denies any bias but says the same strict rules apply to all.—Reuters