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Business

Conditions for Commerzbank aid package appear to be set

The European Commission has set conditions for Commerzbank to get an 18 billion euros ($23 billion) rescue package from the German government. The bank is expected to shed its Eurohypo unit.

Commerzbank logo in the Frankfurt skyline

Help for the ailing bank could soon be on its way

The Frankfurt-based bank will have to split off commercial- property lender Eurohypo to get the European Commission's final approval for a government bailout, the Financial Times Deutschland reported, without saying where it got the information.

The deal between Brussels and Berlin would allow Germany to recue its second-largest lender without the bank having to make heavy concessions that could hobble its business.

"In priniciple we have a package on the details," a Commission source told Reuters news service on Wednesday. "The ball is now in the camp of the German government."

"We will try to make sure that whatever happens will not lead to fire sales," he added. "The bank should not suffer too much from the divestment and it should not distress the market."

More losses could lie ahead

Commerzbank has become Germany's highest profile casualty of the financial-markets storm.

Earlier this month, rating agency Moody's warned that the bank could rack up further losses of almost 7 billion euros this year and next as the global crisis hits loans, a development that would threaten its credit rating.

Olaf Kayser, an analyst at Landesbank Baden-Wuerttemerg, told Bloomberg financial news service that “Eurohypo is a heavy burden on Commerzbank because of its losses and risks in commercial real estate... Commerzbank would have to sell it at a loss.”

While Commerzbank would need to shed Eurohypo, it could keep its eastern-European businesses, according to the FTD.

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