The European Commission on Tuesday approved a German plan to encourage banks to grant new export credits to purchasers so as to limit the adverse effects of the financial crisis.

Under the six-month plan, the German public credit institution KfW would be allowed to purchase existing export loans from banks. The banks would then use the cash to grant new export loans to purchasers outside the European Union.

Because of the financial crisis, banks are currently experiencing severe difficulties in finding long-term funding, which make them reluctant to grant new export credits.

The Commission, the EU's competition guardian, ruled that the plan was appropriate and necessary to address a major market disruption.

"It contains sufficient safeguards to minimize potential distortions of competition. It is also limited in time, foresees market-orientated pricing and applies only to the financing of exports outside the EU," the Commission said.

Germany introduced the plan to facilitate the refinancing of existing export credits, thereby providing banks with appropriate funding to grant new export credits.

"I am satisfied that this German measure would contribute to limit the adverse impact of the current financial and economic crisis on the availability of export credit without giving rise to disproportionate distortions of competition," said EU Competition Commissioner Neelie Kroes.

(Xinhua News Agency September 16, 2009)