Blair on spot as Mittal bids for loan

European bankers today declared they are ready to lend up to another £200 million to "steelgate" tycoon Lakshmi Mittal in a further embarrassment for Tony Blair.

Mr Mittal is expected to ask for the loan as part of his "long-term investment" in the Romanian steel industry controversially backed by the Prime Minister only weeks after the Indian tycoon donated £125,000 to Labour last spring.

Mr Mittal has already received £70 million in a loan from the European Bank for Reconstruction and Development - £6 million of which came from British taxpayers - and today the bank said it would judge a future application "on its merits as a sound banking proposition".

Asked directly if the bank could lend Mr Mittal's LNM group more cash, Noreen Doyle, the EBRD's head of banking said: "It's possible."

With Labour backbenchers beginning to cut up rough over " steelgate", Ms Doyle's comments today offered one ray of sunshine for beleaguered ministers. She confirmed that the bank's original loan of £70million to Mr Mittal had not been made under pressure from Clare Short's International Development Department, contrary to Tory claims.

However, there was still confusion over whether LNM, whose HQ is in the Dutch Antilles, had beaten a French company to the £300-million Romanian contract. Ms Doyle said: "The French were interested but did not submit a bid."

Europe Minister Peter Hain, by contrast, suggested that LNM was "up against" a French rival and that it was important for Mr Mittal's company, which he said had British interests, to win the contract.

Asked today whether the Government would support a further loan application by LNM, Mr Blair's official spokesman sidestepped the issue. He said: "Whatever role we have to play, we will play our part."

He then attacked the media's fascination with steelgate, claiming: "I and the country have Mittal fatigue even if some of you don't."

Labour also faced pressure over news that Mr Mittal had spent £419,000 lobbying the US to close its borders to British steel exports - making a mockery of Government claims that Mr Blair supported LNM to boost UK industry. Welsh Nationalist MP Adam Price said: "It's incredible for a British Prime Minister to be providing support for a foreign competitor."

Opposition parties also reacted angrily to Downing Street's claim that steel policy and opening overseas markets was a " chinstroking exercise among economists". A Plaid Cymru spokesman said: "Labour are now making flippant remarks attempting to take these revelations out of the political arena."

Labour's tangled business links were today illustrated in a photo, taken in July 2000, showing Mr Mittal alongside disgraced former minister Keith Vaz, and Srichand and Gopichand Hinduja, the brothers in the "cash-for-passports" affair. At this time, Mr Mittal had already donated £16,000 to Labour.

The questions that need answering
Comment: Tell us the truth about Mr Mittal
Comment: Cleaning up politics
Cronyism storm over South Bank
Talk about Steelgate