The European Commission approved yesterday a German rescue package which would use 500 billion euros (US$623 billion) to stabilize the financial markets.

The European Union (EU)'s executive arm said it found the scheme to be in line with its rules on state aid to overcome the current financial crisis, following cooperation with the German authorities and the submission of a comprehensive set of commitments to ring-fence the application of the measures.

"The package constitutes an adequate means to remedy a serious disturbance in the German economy while avoiding undue distortions of competition," the Commission said.

"In particular, the package provides for non-discriminatory access, is limited in time and scope and foresees adequate safeguards to minimize distortions of competition."

As part of a coordinated EU-wide rescue effort to restore financial stability, the German government adopted a package of measures earlier this month, aiming to stabilize the financial markets and to address the malfunction of interbank lending.

Under the package, the German government would provide capital and guarantees to eligible financial institutions.