European regulators moved yesterday to open an investigation into the Government’s multibillion-pound survival plan for Northern Rock.

The inquiry, which will run for several months, will establish whether the special support complies with the European Union’s rules on state aid and does not give the bank an unfair competitive advantage over its rivals.

Neelie Kroes, the European Competition Commissioner, said that the investigation was necessary “notably in view of the large scale of the aid measures, the background of current conditions in financial markets and the risks of distortion of competition”.

The formal examination became inevitable after the Government presented the initial two-page outline of its rescue plan on March 17, but rarely has the Commission moved so fast, announcing the initiative within nine working days. Failure to have done so would have exposed Northern Rock to possible legal challenges from competitors complaining that the bank was receiving preferential treatment.

The Treasury welcomed the investigation, stating that “a rigorous, transparent and open process” was important to ensure legal certainty around the Commission’s final decision.

The inquiry - the largest state aid case that European antitrust regulators have handled – could serve as a benchmark for other governments forced temporarily to prop up banks damaged by the world’s present financial turmoil.

The Commission’s multinational investigation team has asked the Government for more specific information. However, British sources suggested yesterday that many of the issues had been addressed in the more complete, nine-page business plan that the Treasury presented on Monday. This provided detail on the size of the bank’s balance sheet, data on its mortgage and savings books and the competition charter that will determine how it operates in the marketplace.

The inquiry will also give Northern Rock’s competitors an opportunity to present their views. Danish banks have complained to the Commission about the rescue plan, but their protests may be more muted now that Northern Rock aims to close its savings banks in Denmark.

The rescue package must demonstrate that it will restore the bank to long-term viability, involve the minimum aid necessary for restructuring and not unduly distort competition.

In early December, the Commission approved emergency aid for six months. The temporary rescue line ended on March 17. The more comprehensive restructuring package that the Commission is now investigating commits the bank to cutting its staff by one third, reducing its home loans and repaying the £24 billion loan from the Bank of England.