EU clears Italian aid for green car parts

BRUSSELS, Oct 26 (Reuters) - The Italian government won permission from the European Union's executive arm on Monday to grant interest rate subsidies to companies producing green products in the auto parts sector.

The European Commission said the scheme, with a budget of 300 million euros ($450 million), would promote a move towards more environmentally friendly products.

"The Italian measure will help companies to shift their business model in accordance with EU environmental objectives, without unduly distorting competition," EU Competition Commissioner Neelie Kroes said in a statement.

The scheme will focus on financing investments related to early adaptation of the so-called "Euro 6" standard, which regulates emissions for light passenger and commercial vehicles.

Subsidised loans may be granted until December next year and the reduced rate will apply for up to two years, said the EU executive, which polices state aid in the 27-country bloc.

The reduction will not exceed 50 percent for small and medium-sized enterprises and 25 percent for large businesses. (Reporting by Bate Felix; Editing by Dale Hudson)