The European Commission yesterday approved the Government's emergency rescue package for Northern Rock.
Officials said there had been no breach of EU state aid rules surrounding the terms of the temporary bail-out of the mortgage bank - but warned that any longer-term restructuring plans would have to run the gauntlet of EU competition authorities again.
A statement said that yesterday's approval "has no bearing on whether any future measures taken by the UK authorities to support a restructuring plan would be similarly approved".
EU Competition Commissioner Neelie Kroes commented: "This case shows that, with good co-operation from the member state concerned, the Commission can move very fast to provide legal certainty for temporary rescue measures. I look forward to continuing to work closely with the UK authorities during any discussions on the future restructuring of Northern Rock."
The Bank of England announced bail-out plans in September, routinely notifying the Commission, which vets all state aid to industry for possible unfair competition contrary to EU laws.
Now the Commission has moved swiftly to reveal its findings, declaring that the cash aid does not amount to state aid, as it was secured by "sufficient" collateral and was also subject to "penal" interest payments.
However, the Treasury's separate guarantee to Northern Rock investors that their deposits will be covered as part of the bail-out does constitute state aid, said yesterday's statement.
That is permissible under EU rules on rescue aid for firms in difficulty, but such aid must be given in the form of "loans or guarantees lasting no more than six months".
In addition, there are some exceptions to the rules for the banking sector to allow for "prudential requirements" which have been applied in Northern Rock's case.
The bank is the UK's fifth-largest mortgage bank, with a balance sheet totalling £101 million as of the end of 2006.
Mortgage lending represents more than 90 per cent of all outstanding loans made by the bank. In line with the rules, the UK Government has promised to present a longer-term rescue plan for Northern Rock by March 17 next year.
It will have to be vetted by the Commission and, if it involves state aid, "it would have to be assessed on its own merits", said yesterday's statement.
It added: "The Commission has not been informed officially of proposals for the bank's future. If state measures are involved we look forward to hearing from the UK authorities at the appropriate time. We do not, of course, have a view about the different possible bidders."
The Treasury said yesterday that it would continue to work with the European Commission while considering the long-term options for Northern Rock's future.
A Treasury spokesman said: "The Government welcomes this swift decision from the Commission, which is the result of the authorities on both sides of the Channel reacting responsibly and quickly to events."
He went on: "We will continue to work with the Commission in considering the options for the company, identifying a solution which meets the Government's principles and maintains compliance with the (EU) state aid guidelines.
Prime Minister Gordon Brown yesterday played down speculation that Northern Rock, which is estimated to have borrowed as much as £29 billion from the Bank of England, could be nationalised, saying the Government preferred a private sale.
"All options are on the table but we are trying to find a private buyer," Mr Brown said, adding that a rescue was important for the stability of the economy.
