Union split over new steel subsidy rules

Date: 12/09/1996

By Chris Johnstone

DIVISIONS between member states over how fresh subsidy rules for the steel sector should be drawn up have prompted warnings that a complete stalemate could scupper hopes of launching a new aid code by the start of next year.

Preliminary talks on the European Commission's proposal for a new subsidy framework have revealed that EU governments are split down the middle over suggested changes.

National experts have already considered the prospect of the prolongation of existing rules if no agreement is reached on a new code. The UK is leading a handful of countries, said to include the Scandinavians, the Netherlands and France, which are worried that the new code will relax the Commission's current control on subsidies to the steel sector. Other countries claim that their fears are exaggerated.

Most concern is focused on a specific Commission proposal to allow subsidies for steel plant which would bring about environmental improvements. Under the current funding code, environmental subsidies can only be sought for equipment which is more than two years old.

The British Independent Steel Producers' Association (BISPA), which includes British Steel, argues the proposed change in the rules would pave the way for subsidies to any capital project which could lay claim to some environmental benefit.

“Under such a rule anything could be possible,” warned a BISPA spokesman. “We think this amounts to a significant weakening of the rules.”

The British steel industry has already fired a warning shot over this issue by lodging a protest in the European Court of Justice against a Commission decision to allow the Luxembourg government to pay aid to steel producer Arbed for a switch to entirely new electrical furnace equipment.

Luxembourg justified its support for Arbed's 5.6-billion-ecu five-year investment programme partly on environmental grounds.

“The new code would formalise exactly what we are complaining about,” said the BISPA spokesman.

In addition, a Commission proposal to scrap the clause allowing regional steel subsidies has divided member states. BISPA supports the move, but says it is still not clear “how this might work out”.

However, the Greek government in particular is worried that its small steel industry will be wiped out if regional subsidies - which are allowed under the existing code - are not written into the new text. It maintains that without such a clause, it would become the only EU country without its own domestic steel industry.

Greece has five major steel companies, the biggest of which are Hellenic Steel and Halyvourgiki, which employs around 1,000 workers. “We are very worried about this issue. We support the general idea of a new code but we want changes, especially on the regional aid question,” said a Greek government official.

Regional steel subsidies are also set to become a big issue in Belgium, where Forges de Clabecq is looking for some sort of lifeline from the Walloon regional government to stay alive.

Germany denies it is backing a fresh regional subsidy clause, although it benefited from the old rules and could hope that a new framework might support struggling steel plants in Bavaria and the Saarland.

The British steel industry is putting pressure on the Commission to shake up its entire procedure for dealing with steel subsidies.

It wants an end to cases dragging on for years, with a commitment from the Commission to introduce deadlines of between three and six months for wrapping up aid dossiers.

“I think there is general agreement that cases run for too long at the moment. The damage could be done and the victims of some aid cases could have disappeared by the time decisions are given now,” said the BISPA spokesman.

The new steel subsidy code is scheduled to run until 2002, when the whole European Coal and Steel Treaty is due to expire.

But the British steel industry is pushing for a separate steel aid framework to be maintained after that date.