(Image Source: euronews)

BY KATIE BRENNAN
ANCHOR MEGAN MURPHY

The EU gave the French government permission Monday to help temporarily
save carmaker Peugeot.  CNBC Europe explains, the government will back bonds to bail out
a bank attached to the carmaker, which has seen falling sales in a depressed European
car market.

“The EU has temporarily approved, this news just out, temporarily
approved french aid to peugeot citroen bank. In other words approving aid to the inhouse
finance arm to the struggling french automaker Peugeot.”

EuroPolitics explains the
relationship between that finance arm, Banque PSA Finance and its owner, PSA Peugeot Citroen.

“BPF
is a ‘captive’ bank in that it finances only the commercial activities of PSA Group, Europe’s
second largest automotive group. BPF provides credit to buyers of cars manufactured by PSA
and to its dealers.”

(AOC)
Because of that connection, the Telegraph reports
the bank is feeling the hurt in the European economy.

“Global sales by France’s
biggest automotive company and Europe’s second-biggest, dropped 16% last year to below 3 (million)
units, as the car maker fell victim to slumping demand in Europe where the company makes about
60% of its turnover.”

Given its size, the French government announced a rescue plan
for BPF in October of last year. Now, the government will back 1.2 billion euros, that’s
about 1.6 billion dollars, worth of new bonds to finance BPF. But it needed the European
Union’s permission to do so first. And this thumbs up is temporary.  

A European
Commission Spokesman told Euronews “We expect France to notify us of a restructuring plan,
not just for the banking arm but for the whole PSA group, because this aid also benefits
the whole group.”

France has to get that plan to the commission in the next six
months. The commission would then review it and make a final decision on the aid. Bloomberg
explains there are still other rescue options available.

“The French papers full
over the weekend whether or not the French government would ultimately have to step in
and buy a chunk of this business. That story still not off the table and still very much
ongoing.”
 It’s not clear how deeply the company will
have to restructure to gain further EU approval, but the struggling carmaker is already cutting
8,000 jobs and closing a major assembly plant.