Brussels moved swiftly on Tuesday to reject suggestions that European governments could require preferential purchases from local suppliers in return for soft loans provided under financial aid packages.

The idea was triggered by France, which is considering requiring its carmakers to buy specific volumes of products from local suppliers in return for soft loans and loan guarantees.

European Union competition commissioner Neelie Kroes is to see French industry minister Luc Chatel on Wednesday, a meeting set up on Monday at France’s request.

France has pledged up to €6bn ($8bn, £5.4bn) to help its distressed carmakers and is due to outline specific measures soon.

The Commission said it had not been told of details of the French plan, nor of the possible proposal to tie aid to levels of purchasing from domestic suppliers.

But it made clear that any discrimination in the conditions for receiving assistance would fall foul of EU rules: “As with all state aid plans, we have to ensure that they comply with the principle of non-discrimination.” Although the French government has insisted it will demand pledges of support for French jobs in return for its aid, officials also stress that nothing will be done that contravenes European regulations.

The government is concerned by what it sees as the precarious position of small and medium suppliers. The auto industry accounts for about 10 per cent of employment in France, but the biggest percentage is provided by the thousands of small companies that supply parts to components suppliers.

It is estimated that though the auto industry accounts for 2.5m jobs, about 2.25m are found in supply companies rather than the carmakers themselves. Many of these are under-capitalised.

Réné Ricol, the watchdog appointed by the government in November to ensure that banks were extending credit to petite et moyenne entreprise [PMEs], said he would be paying particular attention to the plight of auto suppliers.

“There is a savoir faire there that if we lose we will not be able to recover. Banks have to be ready to take more risk to preserve our savoir faire. We have to preserve our subcontractors.”

Tough times for car industry affects region

Get alerts on European banks when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Comments have not been enabled for this article.

Follow the topics in this article