Author (Person) | Jones, Tim |
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Series Title | European Voice |
Series Details | Vol 6, No.18, 4.5.00, p18 |
Publication Date | 04/05/2000 |
Content Type | News |
Date: 04/05/2000 By IF THE real test of potential subsidisers is what they do at awkward political moments, then the EU's governments have failed. The European Commission's recently published survey of state aid revealed that, of the annual €93-billion paid out in 1996-98, an increasing amount (7% and rising) is granted on an ad-hoc basis to bail out ailing companies. Unpredictable as they are and targeted on one company in a giant single market, these types of subsidy are the most distortive to trade and worry the Commission's aid-busting regulators most. "I do not believe it can be the norm in the single market that enterprises which get into difficulty are automatically rescued by the state," Competition Commissioner Mario Monti told a conference of German regional ministers in April. "It is a normal part of a market economy that businesses which are unable to survive competition from their own resources are obliged to exit the market. This enables their assets to be reused and resources to be allocated more efficiently in the economy." Most disappointing of all for Monti, the two most recent examples of blatant rescue packages have come from one star pupil and a reformed sinner: the UK and Germany. A comparison of aid measured in euro-per-employee puts Italy at the top of the EU league and the UK and Sweden at the bottom. Yet, by announcing a €145-million aid package to what remains of its coal industry, London is reversing a 15-year programme to put mines on a market footing. However, faced with unmatchably cheap imports from Asia and the Americas, RJB Mining - which owns 13 of the country's 17 deep mines - threatened to close Ellington colliery in north-east England and Clipstone in the Midlands with 450 job losses. This is peanuts compared with the 10,000 jobs at risk from BMW's break-up of the Rover Cars group but is politically sensitive for the Labour government, which has a long history of links with the miners' unions. Ellington is also on the doorstep of Prime Minister Tony Blair's and Industry Minister Stephen Byers' constituencies. Given that it had regularly cleared 10-billion-plus-euro aid packages to the German coal sector in recent years, the Commission's energy department knows that it will have to clear the British aid, albeit with strings attached. The same cannot be said for Germany's bail-out of errant construction firm Philipp Holzmann, which filed for bankruptcy in November after auditors discovered a 1.2-million-euro black hole in the company's accounts and creditor banks threw out the board's restructuring plan. After a decade in which industry in eastern Germany accounted for nearly a quarter of all manufacturing aid in the EU and successive subsidy-diversion cases riled Commission regulators, things were starting to look up. The recent action by the Commission to claw back €808 million in soft loans to Westdeutsche Landesbank Girozentrale aside, relations between Brussels and Berlin had improved markedly. Then along came Holzmann. The bankruptcy petition was withdrawn after Chancellor Gerhard Schröder intervened with the promise of aid - a short-term loan from state-owned Kreditanstalt für Wiederaufbau for €76.7 million and a government-unwritten loan of €63.9 million - underpinning a €1.5-billion bail-out package. To begin to qualify for this aid, Holzmann must prove that its restructuring plan including branch closures, the sell-off of shareholdings and longer uncompensated working weeks for employees is deadly serious. The Commission is not convinced and has opened an inquiry, warning that "the plan does not yet meet the requirements of the Community guidelines on state aid for rescuing and restructuring firms in difficulty". A mighty political battle can be expected since Schröder's personal fingerprints are all over this rescue plan. Article forms part of a survey, 'Industrial liberalisation'. |
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Subject Categories | Internal Markets |
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