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The German government could be willing to bail out Opel if parent company General Motors runs out of money by the end of this year. The EU will back the decision.

German Chancellor Angela Merkel said the government would decide by Christmas if it will give loan guarantees worth €1bn (£842m), but the plan was given extra impetus by EU industry commissioner Gunter Verheugen.

Verheugen said that he would welcome anything that could be done to “prevent an important and traditional car producer in Europe from dropping out of the competition for reasons it’s not responsible for”.

He also said that the EU would not consider the assistance offered by the German government as anti-competitive towards other European car makers, because Opel’s problems were being caused by the decline of a US firm.

Opel has said that any money it receives from the German government would stay in Germany, allaying fears that German cash could be used to shore up GM’s failing US operation.

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