European Union competition regulators urged U.S. carmaker General Motors on Wednesday to draft a recovery plan for its European arm, Opel, that would ensure its long-term viability.

They dismissed any suggestion that EU regulatory action could have been a factor in GM's decision to scrap a deal to sell Opel to Canadian car parts supplier Magna and Russia's Sberbank.

The EU executive, the European Commission, had challenged the terms of the funding Germany pledged to support the sale of Opel, forcing Berlin to clarify that the aid would have been available to anyone who had bought the company.

The Commission expects the new GM restructuring plan to be based on solid economic grounds, in order to ensure the long-term viability of Opel and sustainable jobs for Opel's workers, the Commission said in a statement.

It said it would verify that any financial aid given by any EU countries to Opel complied with EU rules.

European Competition Commissioner Neelie Kroes has often stated during the global economic crisis that state financial support to prop up struggling industries and companies must comply with EU rules.

GM said on Tuesday it was pulling out of the deal with Magna and Sberbank, and attributed the decision to improving business conditions and Opel's strategic importance.

GM Europe will now revert to a reorganisation plan that envisages chopping fixed costs at Opel by 30 percent, a spokeswoman said.

COMMISSION SAYS GERMAN CONDITION WAS PROBLEM

Commission spokesman Jonathan Todd said the Commission's role was only to verify that any aid complied with EU rules.

It would have been ideal if the German government had not imposed the pre-condition (giving the state aid only to Magna). The pre-condition was the problem. So the Commission can't be held responsible for the pre-condition, he told Reuters TV.

He said GM should now know that any attempt to impose such pre-conditions would not be tolerated by the Commission and reiterated that any state aid must be available irrespective of where re-structuring would take place and based on purely economic and commercial grounds.

Some analysts and experts saw the Opel case as a success for the European Commission as it seeks to ensure a level playing field and avert a race for state subsidies.

This has strengthened the Commission's position as a competition authority, said state aid lawyer Michael Schuette.

The Commission did indeed play hard ball. They try to defend their policy. It is quite legitimate but not easy to pursue. Overall they did a proper job.

Others said the Commission could have handled the case faster if it had worked more closely with the governments of EU member states to find a pan-European solution.

This was a missed opportunity. The Commission could have been more proactive but it did not see any willingness among the EU countries, said Karel Lannoo, chief executive at the Centre for European Policy Studies think tank.

(Reporting by Foo Yun Chee and Yvonne Bell; Editing by Jon Loades-Carter)

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