EU calls on France to withdraw unlimited guarantee to La Poste

The European Union (EU) told France on Wednesday to end the unlimited guarantee it gives the country's post office La Poste that allows it to borrow money on better terms than rivals.

France, which is urged to follow the recommendation by the end of 2008, has one month to respond, the EU's executive European Commission said in a statement Wednesday.

The fact that the guarantee is unlimited allows La Poste to obtain finance on more favorable terms, giving it an advantage over its competitors and thus distorting competition on a market which is in the process of being liberalized, the commission said. La Poste's special status as a publicly owned company meant it was exempt from ordinary bankruptcy and insolvency procedures and the state could ultimately be held liable for its debts, it added.

"This situation is tantamount to a state guarantee that is unlimited in amount and in duration and covering all of the liabilities of La Poste," it said.

The commission said it was not calling into question La Poste's position governed by public law or its public ownership.

Source: Xinhua