The German government has reached agreement with two state governments for a loan guarantee of 50 million euros for the Quelle mail order unit of insolvent Arcandor.

State ministers from Bavaria and Saxony said after a four-hour meeting in Berlin's Economy Ministry they had reached an agreement with the federal government, which will back 25 million euros while the states will also back 25 million euros.

The European Commission, in charge of monitoring state aid in the 27-country bloc, said in a statement that the aid complied with EU guidelines as it was a loan and limited in time.