The European Commission said today it was considering legal action over the privatisation of Landesbank Berlin (LBB) in a move Germany's finance ministry said was without foundation.
A spokesman for EU Competition Commissioner Neelie Kroes said in Brussels the Commission could take Germany to the European Court of Justice or start an investigation into state aid due to concern about conditions attached to the sale.
The Commission had allowed the bank, which is owned by the city of Berlin, to receive €9.7 billion in state aid based on a number of conditions, including that the lender be sold this year in a transparent and fair auction.
Newspaper Handelsblattreported earlier this month that Kroes believed Berlin had set sale criteria that could deter bidders, such as demanding a 10-year employment guarantee.
A German finance ministry spokesman said today the Commission's concerns about the sale were without foundation.
"We consider the accusation that there is no competition here to be false," spokesman Torsten Albig said, adding that conditions were the same for all bidders and there was no element of discrimination.
If the case reached the European Court of Justice it could cause considerable damage, Albig said.
The sale of the Berlin state government's 81 per cent stake in LBB has attracted wide attention because it offers a foothold in one of Europe's most competitive banking markets.
LBB's Berliner Sparkasse branches are used by almost one in two people in the German capital.