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Holzmann bail out faces probe

News

GERMANY faces the prospect of a European Commission probe after its decision in November to bail out loss making contracting giant Philipp Holzmann.

German Chancellor Gerhard Schroder's Social Democrat-led government agreed the last ditch rescue effort for the firm, which was on the brink of declaring itself insolvent.

Holzmann said that encouraging operating results from restructuring last year had been swamped by DM2.4bn ($1,320M) of claims and liabilities.

The government has offered a special credit guarantee of DM100M plus a DM150M 'mezzanine' credit from its Kredietanstalt fur Wiederaufbau bank, which funded reconstruction of east Germany after unification.

EU Competition Commissioner Mario Monti said it had not yet received a request for approval from the German government. But any complex restructuring plan could take some weeks to assess.

However European Union law allows only 'a short term holding operation' for assessment. Aid can only be as guarantees or short term funds, with approval extended after six months. A second bail out is not allowed.

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