Glass industry voices fears of subsidies in Germany

Date: 31/10/1996

By Chris Johnstone

FLAT glass producers have focused on suspicions of German state subsidies to new plants in the former eastern Länder as a test of European Commission promises to clamp down on aid if the industry was in crisis.

The European permanant committee for the glass industry, known by its French acronym CPIV, says the Commission promised in 1985 to ban any aid if there was serious overproduction.

With flat glass prices hitting their lowest levels in real terms for decades, and with no prospect of any increase in the next three or four years, Europe's glass industry is now calling on the Commission to fulfil its pledge.

Lobbyists for the industry say overcapacity is hovering at around 15&percent; due to the slump in Europe's auto and construction industries - the two major consumers of flat glass.

“In real terms, prices are 60&percent; lower than they were 20 years ago,” said CPIV secretary-general Gilbert Maeyaert.

The sector has called on the Commission to probe two cases of suspected subsidies. Suspicions have been aroused by the failure of the German authorities to notify any aid in either instance.

The latest case concerns plans by Swiss holding company Troesch to build a plant near Magdeburg, Saxony, with an annual capacity of around 600 tonnes a year.

This follows on from an announcement by US company Guardian Industries that it intended to construct a flat glass unit of similar capacity in Wolfen Thalheim.

Suspicions have been fuelled by a belief within the industry that no one would go into flat glass production in the current climate without support.

“Looking at current investment yields, no one would launch fresh production without incentives,” said Maeyaert.

The industry lobby says it is only asking the Commission to live up to its past promises and stresses that it is not requesting any sectoral code for aid to the flat glass sector.

If officials discover that illegal aid has been paid in the two east German cases, this could put the Commission on a collision course with Germany's federal government once again over the sensitive issue of what is an acceptable level of support for the new Länder.

This delicate question was at the heart of the clash between Germany and the Commission earlier this year over a disputed 48 million ecu in subsidies for the car giant Volkswagen in Saxony in which a head-on collision was only narrowly avoided.