EU cash may be used to cushion end of duty free

Date: 14/01/1999

By Chris Johnstone

THE European Commission is considering using EU funds to cushion the impact of the end of duty-free sales as it attempts to fend off demands from some member states for a lengthy extension to the June deadline for scrapping the concession.

Officials working for the special taskforce set up by the Commission to re-examine the issue have suggested that additional money could be set aside to ease the potential job losses in hard-hit sectors such as the ferry industry.

"We are looking at whether we can develop something to address the problem of job losses," said a Commission source. "We are not just rehashing old reports and studies."

The task force was set up in response to demands from EU leaders at their Vienna summit in December for the Commission and finance ministers to look at the issue again.

The body's report will be submitted to the full Commission on 10 February, giving national governments plenty of time to consider its findings ahead of a key meeting of EU finance ministers on 15 March.

Ministers are due to decide at that meeting whether to relax the June deadline and what measures, if any, should accompany abolition.

Commission insiders say "every option" is being looked at, including the possibility of a reprieve. However, they add that the institution would only support an extension of the deadline if there was concrete evidence that it could save jobs, and that could be difficult to establish.

Single Market Commissioner Mario Monti's officials have long questioned claims that abolition would lead to massive job losses, arguing that the main effect of duty free has been to shift sales from the high street to airports and ferry shops and distort the market, rather than boost employment.

"The task force has not taken a position yet on extending the deadline," said the Commission source, who added that an extra three-to-six months delay might be the most that the institution could contemplate even if it accepted the jobs argument.

Meanwhile, those Union governments arguing in favour of an extension are keeping up the pressure on the Commission to deliver a thorough analysis of the impact of abolition.

German Finance Minister Oscar Lafontaine plans to hold a lunchtime debate on the issue when he chairs the first finance ministers' meeting of the German presidency next Monday (18 January).

Diplomats and the duty free lobby believe Lafontaine has put the issue on the agenda to ensure the Commission does not backslide on the summit demands. "It is there to make sure the Commission knows what is expected in producing a new report," said one diplomat.