Plan to delay coal aid fuels UK protest

Date: 27/03/1997

By Tim Jones

THE German government's plans to decelerate reductions in coalmining subsidies have provoked protests from London and renewed scrutiny by the European Commission.

The UK trade ministry is preparing a complaint against German Chancellor Helmut Kohl's decision to buy off coalminers' discontent with an extra 250 million ecu of subsidies to their industry next year and a slower rate of job losses.

Under Bonn's original programme, coal subsidies were to be cut from 4.6 billion ecu now to 1.9 billion ecu by 2005. The Kohl compromise will increase the 2005 figure to 2.8 billion ecu.

This has angered UK Trade Minister Ian Lang, who wrote to his German counterpart Günter Rexrodt in February to complain about the original plan which, he claimed, did not reduce subsidies quickly enough.

The British coal industry, which was privatised in 1994, has been operating in a tough commercial environment since a national strike was defeated by the government 12 years ago.

But the other major European producers still heavily subsidise their industries. Hand-outs from the German government alone account for more than half of total EU coal state aids, with much of this paid to bridge the gap between high German coal prices and those on the world market.

The UK government has complained to Bonn that this form of aid distorts competition in the European Coal and

Steel Community (ECSC) and damages the wider liberalisation of energy markets.

In his letter, Lang suggested that aid should be restricted to mines which were expected to reach economic viability by 2002.

Energy Commissioner Christos Papoutsis is sifting through the compromise to see whether the terms of his approval for the original aid package have been contravened.