Sweden's government said Thursday it has decided to let the Swedish Debt Office prepare negotiations with Saab Automobile AB regarding the terms of state credit guarantees for loans from the European Investment Bank.

The decision means that the Debt Office can start negotiations with Saab Automobile, the EIB, and the incoming owner, once known, about the terms for state guarantees.

The guarantees would cover EIB loans for realigning Saab's business toward more environmentally friendly production.

Before a government decision regarding the guarantees can be made, the EIB will have to agree on the loan frame and in some cases the European Commission will have to agree on the terms of the state credit guarantee offering, the government said.

Saab Automobile AB is owned by U.S. carmaker General Motors Corp. (GM).

Government Web site: www.regeringen.se

-By Gustav Sandstrom, Dow Jones Newswires; +46-8-5451-3099; gustav.sandstrom@dowjones.com