Subsidy wrangle ‘broke state aid rules’

A ruling by the European Court of Justice against subsidies paid to German steel firms has been welcomed by the UK Steel Association. The court ruled that payments and pledged handouts of DM275m (£100m), made by the Bavarian regional government to two local steel companies, were illegal. Neue Maxhutte Stahlwerke and Lech-Stahlwerke will probably be […]

A ruling by the European Court of Justice against subsidies paid to German steel firms has been welcomed by the UK Steel Association.

The court ruled that payments and pledged handouts of DM275m (£100m), made by the Bavarian regional government to two local steel companies, were illegal.

Neue Maxhutte Stahlwerke and Lech-Stahlwerke will probably be forced to comply with a European Commission order that they repay state aid of DM74m granted between 1993 and 1995. Bavaria will also be banned from paying DM200m that it had promised the two companies. The parties have two months to appeal.

The announcement follows months of litigation with the Commission. During this time, Neue Maxhutte Stahlwerke was forced into receivership after being declared bankrupt.

Ian Rodgers, UK Steel policy director, said the lengthy legal action in Germany to try and prevent the repayment of aid broke European state aid rules designed to prevent unfair national advantage in the EU through subsidies.

The court said: ‘Since 1995 Neue Maxhutte had been accumulating losses resulting, in particular, from excess production capacity and excessively high manufacturing costs.

‘The company’s survival was closely linked to capital investments and to the possibility of not subsequently repaying the loans granted by Bavaria.’

The European Coal and Steel Community Treaty prohibits generally and unconditionally all state aid to companies in the steel sector.