Brussels - The European Union's investment bank is to boost to almost 7 billion euros (8.9 billion dollars) its loans to the auto industry to develop climate-friendly cars, but it cannot save the sector from economic crisis, the bank's manager said Monday.

"By the end of June, we will probably have approved loans totalling 7 billion euros" to the car industry, the vast majority being awarded to clean-car projects, Philippe Maystadt, president of the European Investment Bank, told journalists in Brussels.

That is far more than the 4 billion euros originally called for by the EU's executive, the European Commission, in November, but far less than the 40 billion the industry had demanded.

And it is more than 10 per cent of the bank's total loans, meaning that "in terms of policy and sound banking practice, it would be a mistake" to lend any more to the automotive industry, Maystadt said.

Maystadt's statement comes as the EU's car manufacturers are being devastated by the economic crisis, with car sales plummeting and dire warnings of bankruptcy and mass job losses in an industry which provides some 12 million jobs across Europe.

According to industry umbrella group ACEA, vehicle production slumped 28 per cent in the last quarter of 2008, and is expected to fall a further 15 per cent this year.

The EU's executive, the European Commission, in November called for an aid package of 5 billion euros, including 4 billion from the EIB, to help the European car industry develop less environmentally-damaging vehicles as part of the bloc's response to climate change and the economic crisis.

But while the EIB looks set to lend far more than that, Maystadt warned that the 7 billion euros now under discussion would all but exhaust the bank's generosity to Europe's car makers.

"As the long-term financing arm of the EU, we cannot bail out companies in difficulties: this is not our mission. We cannot provide short-term liquidity, because we're not a central bank, and we cannot provide restructuring in sectors which need it," he said.

The EIB was founded in 1958 to provide long-term financing for projects aimed at bringing EU states closer together.

Its shareholders are the EU's 27 member states, and it funds its activities by issuing debt on international markets. (dpa)