The European Commission on Wednesday, June 3, approved a state bailout worth billions of euros for struggling German bank SachsenLB, which was hit by the US suprime mortgage market crisis.
SachsenLB is now called Sachsen Bank
EU officials ruled that the state aid would not give the financial institution an unfair competitive advantage.
The eastern German state of Saxony had put up guarantees of 2.75 billion euros ($4.24 billion) -- a fifth of the state's annual budget -- for the bank in December. This was meant to keep it from collapsing amid the bank's sale to western German state bank LBBW. Savings banks also participated in the bailout by providing a liquidity facility of 17 billion euros.
"The commission is satisfied that these aid measures will restore the viability of SachsenLB without unduly distorting competition," EU Competition Commissioner Neelie Kroes said in a statement, citing special regulations that allow public financial support to save and restructure companies in trouble.
SachsenLB has been renamed Sachsen Bank in the meantime. The state's former premier, Georg Mildbradt, stepped down in the aftermath of the bank's near-collapse. His successor, Stanislaw Tillich, took over as premier last week.