Attempt to probe state aid for glass falls flat

Date: 06/02/1997

EUROPEAN flat glass producers have lost their bid to win European Commission backing for an aid probe into German state subsidies to new plants in the former eastern Länder.

The European Permanent Committee for the Glass Industry, known under its French acronym CPIV, says competition officials have declared there is nothing abnormal about the subsidies from Bonn and they do not intend to investigate.

The CPIV had called on the Commission to probe two cases of suspected subsidies after the German authorities failed to notify any aid.

The cases concern plans by Swiss holding company Troesch to build a plant near Magdeburg, Saxony, with an annual capacity of around 600 tonnes a year, and US company Guardian Industries' announcement that it intends to construct a flat glass unit of similar capacity in Wolfen Thalheim.

CPIV secretary-general Gilbert Maeyaert argues that no one would go into flat glass production at this stage without support. “Looking at current investment yields, no one would launch fresh production without incentives,” he insists.

The industry lobby says it is only looking to the Commission to live up to its past promise in 1985 to ban any aid to sectors with serious overproduction.

Europe's glass industry says flat glass prices have hit their lowest real levels for decades and there is no prospect of any increase in the next three or four years. Over-capacity is hovering at around 15&percent; due to the slump in Europe's auto and construction industries, the two key consumers of flat glass.

The CPIV is sceptical about the impact the small upturn in both sectors promised in recent Commission reports could have. “In real terms, prices are 60&percent; lower than they were 20 years ago,” it claims.

Discovery of illegal aid in the east German cases would have put the Commission on a collision course once again with Germany's federal government over the delicate question of what are acceptable levels of support to the new Länder.

That issue is still a sensitive one after the head-on clash between the Commission and Bonn over a disputed 48-million-ecu subsidy for car giant Volkswagen in Saxony. The federal government and Volkswagen met three weeks ago to discuss the subject, but officials have refused to say any more.

The German flat glass industry, one of the 12 national associations making up the CPIV, was the first to warn of

the alleged aid to east Germany and would be the first to suffer from competition with the new plants.