The French government's plan to shore up the capital position of France's six main retail banks is being blocked by the European Commission, which insists they must reduce their lending in return for state support.

Christine Lagarde, French finance minister, yesterday spoke to Neelie Kroes, EU competition commissioner, to persuade her to lift her veto on France's €10.5bn ($13.3bn) support package but Ms Kroes is sticking to her view that banks cannot use state aid to increase their lending books.