The shape of a European Commission rescue package for the European automobile industry now being drafted will come by way of a 40 billion Euro soft loan pushed through the European Investment Bank (EIB).

This was revealed by EU industry commissioner Günter Verheugen after a meeting with European automobile executives, including France’s Peugeot-Citroën and Germany’s Daimler, under the umbrella of the EU’s CARS 21 reform initiative.

Verheugen said the money would be tied to retooling required to reduce the carbon emissions of vehicles, effectively making these vehicles cheaper, and maybe preventing some manufacturers going under or downsizing.

“We have to make sure the extra effort they must make to have lower emissions is not settled through subsidies but that it should be possible for them to have proper access to credit,” Mr Verheugen said.

“Loan subsidies could be provided via the European Investment Bank.”

By focusing on the environment, and also using the EIB, the commission should be able to avoid any legal challenge to the package that the EU was unfairly favouring the automotive industry and was breaking its own state aid anti-subsidy rules.

The initiative has been welcomed by the European automobile manufacturing association ACEA.

It said: “A low-interest loans package would help secure a sustainable market for current and newly developed fuel-efficient technologies.

"The package would, for instance, provide provisions to sustain investments in R&D and new product programmes.”