14 November Industry Council

Date: 21/11/1996

INDUSTRY ministers agreed on a new code for state subsidies to the steel sector after the rules were tightened following complaints from the UK, the Netherlands, Denmark, and Sweden that the original Commission proposal contained too many loopholes. Agreement on the new code, which takes effect from the start of 1997, averted a chaotic situation where individual countries would have had to vet aid if no deal was in place. The new code puts approval of subsidies for research and the environment in the steel industry on the same basis as for other sectors. For the first time it also permits support for the temporary shutting down of capacity, so long as tight conditions are met. Greece won its argument for regional aid to its industry until 2000 on condition that the total subsidies do not exceed 50 million ecu and production capacity is capped.

COMPETITION Commissioner Karel van Miert failed to convince ministers that the Commission's powers to scrutinise large, cross-border mergers and joint ventures should be increased. Seven countries opposed Van Miert's most ambitious proposal for lowering the company turnover thresholds used to trigger Commission investigations. The chances of approval for Van Miert's fall-back proposal - under which deals affecting at least three countries would be handled by the Commission - also look slim, said diplomats.

VAN MIERT shrugged off opposition from some countries and promised to pursue proposals to streamline and improve the scrutiny of state subsidies. Spain, together with Greece and Portugal, refused to accept a resolution giving political backing for the reform of the subsidy rules. But Van Miert took a Council conclusion noting the Commission's plans as an indication of broad backing for his initiative. Ministers refused to accept the detailed four-page resolution spelling out the changes envisaged by Van Miert. The call for stricter state aid control has been pushed by the Irish presidency and is aimed at ensuring bigger, richer countries, such as France and Germany, do not outbid smaller, poorer countries on help offered to companies.

SPENDING on the third action programme for small and medium-sized businesses (SMEs) was fixed by ministers at 127 million ecu, 53 million less than the original Commission proposal. Debate was fierce, with both Germany and the UK demanding a 120-million-ecu budget for the three-year programme to 2000. In a parallel move, ministers called on governments to do their utmost to promote small business in order to boost growth and job creation. Governments should simplify the administrative burden on small firms and make it easier for them to plug into Commission programmes, added the resolution.

MINISTERS backed a Commission communication highlighting the need for European firms to carry out bench-marking to match the competitiveness of rivals. A resolution called on the Commission and governments to identify further areas where bench-marking should be used, and encourage the joint launch of pilot projects. A separate resolution focused on the importance of the car industry as a key sector and said the onus should be on the industry itself to maintain its recent restructuring, although governments should provide the right environment.