Carmakers receive €5bn boost

Carmakers will receive €5bn for investments in environmentally friendly vehicles as part of an economic stimulus package approved by the European Commission, write Joshua Chaffin in Brussels and John Reed in London.

Some of the money is previously earmarked funds, and the amount initially pledged appears to be much less than the €40bn ($51bn, £34bn) in soft loans carmakers were seeking.

“We are not proposing an old-fashioned industrial plan for the car industry,” said Jose Manuel Barroso, European Commission president.

The funds proposed on Wednesday include €4bn from the European Investment Bank, the European Union’s long-term lending institution, of which €2bn had previously been committed, according to a person familiar with the matter. An additional €1bn is expected to come from EU sources.

In an effort to stimulate demand, the Commission recommended that member states offered tax incentives encouraging consumers to trade in older, higher-polluting vehicles for new models.

Acea, the European carmakers’ lobby group, welcomed Wednesday’s decision, but Peugeot boss Christian Streiff, its chairman, said the pledge needed “to be translated swiftly into concrete and effective measures to help an industry in great danger”.