NEW YORK (AFX) - Germany's federal and state governments are confident they can resolve their long dispute with the European Commission over the country's public sector Landesbanks at decisive talks in Brussels tomorrow, the FT.com reported.
"We expect a fundamental agreement at a political level," Hartmut M|ller-Gerbes, the finance ministry spokesman for North Rhine-Westphalia, one of the states at the centre of the dispute, was quoted as saying.
"We expect we will reach an agreement acceptable to both the states and the EU commission," said a federal government official. Other German officials continued to warn that a deal could still founder on the issue of transition periods for eliminating the controversial state guarantees at the heart of the affair.
The Commission says the guarantees -- for both loans and the financial viability of the banks -- distort competition among European banks, since the safety net they provide allows Landesbanks to borrow money at cheaper rates than private sector counterparts.
According to what commission sources told AFX New, the Commission is unlikely to accede to a request from German state-owned Landesbanks for a 10-year transition period during which they could continue to benefit from public guarantees. Failure to reach agreement tomorrow would result in the Commission taking legal action this month. The Commission says Germany would have until September to provide details of any new regime.