COLUMN-Kroes control won't stop German Opel deal: Paul Taylor

-- Paul Taylor is a Reuters columnist. The opinions expressed are his own --

PARIS, Oct 19 - Neelie Kroes is making menacing noises about Germany's dodgy subsidies for the Opel rescue, but that seems to be about all she is going to do. The sale of General Motors' European arm to Canadian parts maker Magna and Russia's Sberbank looks set to go through with little more than a slap on the wrist from Brussels.

This case shows the limits of the European Union competition czar when faced with a determined big member state defending what it considers a vital national industry. Although Brussels could in theory veto the Opel deal, it does not want to incur the political blame for tens of thousands of potential job losses. Therefore it is allowing itself to be fobbed off with unconvincing retroactive assurances of even-handedness.

Kroes wrote to Berlin last week voicing doubt that a German government offer of 4.5 billion euros in state aid for the stricken carmaker was in line with EU rules because it was tied exclusively to the purchase by Magna and Sberbank.

She said that GM and the Opel Trust should be given an opportunity "to reconsider the outcome of the bidding process on the basis of firm written assurances by the German authorities that the aid would be available, irrespective of the choice of investor or plan, in order to ensure the long-term viability of New Opel".

But this is largely a symbolic gesture. Now that the German government has written back, promising that the aid would have been available to all-comers, and the only rival bidder for Opel, Belgium's RHJ International, has said it is no longer interested, it is likely that the Commission will wave the deal through.

This may respect the letter of EU law -- just -- but it manifestly flouts the spirit.

For months, German politicians from Chancellor Angela Merkel on down have used the promise of taxpayers' money to skew the bidding process towards Magna because it promised to save all four production sites and most Opel jobs in Germany.

The GM negotiator indicated he would have preferred RHJ's bid, which required substantially less state aid, but he reluctantly recommended Magna's because Berlin would not give RHJ the loan guarantees.

This is the second time this year that the European Commission will have turned a blind eye to national conditions in authorising state aid to car makers. In February, Kroes approved a 6 billion euro French loan to Renault and Peugeot after President Nicolas Sarkozy agreed not to put in writing the publicly stated condition that they must not close any plant in France.

The commissioner has struggled throughout the financial crisis to uphold the EU's competition and single market rules against a wave of national subsidies for ailing banks and manufacturers.

But the Opel deal will set a precedent that big member states can get away with bending the rules. The EU, and German taxpayers, may live to regret that.