The European Union has approved state aid for a small but systemically relevant Dutch banking group, the bloc's executive announced Friday, while warning that the measures would likely prevent the Netherlands from reaching EU deficit limits this year.
The European Commission temporarily approved state measures for Dutch banking group SNS Reaal including a 300-million-euro (397-million-dollar) recapitalization and a bridging loan of 1.1 billion euros.
SNS Reaal's banking subsidiary, SNS bank, will also be recapitalized to the tune of 1.9 billion euros, the commission said.
The EU approval is conditional on the bank presenting restructuring plans in the next six months explaining how it will return to profitability.
As a result of the state aid, the Netherlands would likely breach the EU's deficit limit of 3 per cent of gross domestic product (GDP) in 2013, the commission said.
The bloc's executive estimated that the Dutch deficit would only reach 3.6 per cent of GDP in 2013 - down from 4.1 per cent in 2012 - confirming Dutch calculations that the bailout for SNS Reaal would push the deficit up by 0.6 per cent.
SNS Reaal got into trouble after real estate loans lost value, threatening to take down with them the healthy side of the bank.
The Dutch government had already stepped in to help the banking group during the credit crisis, shoring it up with around 800 million euros. Since May 2007, the bank's share price has suffered a nosedive of 95 per cent.