Bonn cuts back aid for Airbus

FRANKFURT (Reuter) - The German government has said it will stop protecting Daimler-Benz from exchange rate losses, following prolonged international criticism of subsidies to Europe's Airbus Industrie.

Erich Riedl, a state secretary in the Economics Ministry, was quoted in the Suddeutsche Zeitung and Frankfurter Allgemeine Zeitung newspapers as saying an agreement to end Bonn's exchange-rate guarantees, retroactive to the beginning of 1992, would be signed by the end of September.

In exchange for Daimler-Benz abandoning claims for exchange rate losses, the government will give its 20 per cent stake in Deutsche Airbus to Daimler four years earlier than planned.

The Suddeutsche Zeitung quoted Mr Riedl as saying the agreement was helped along by the improved business prospects for Airbus after its sale last week of 50 Airbus A320 aircraft to United Airlines. United also took options for a further 50 jets.

Mr Riedl also said the action was designed to improve the climate in talks on the General Agreement on Tariffs and Trade between the US and Europe.

Bonn said earlier the privatisation of its stake in Deutsche Airbus, a unit of Daimler-Benz and part of the European Airbus consortium, would be carried out by 1996. Daimler-Benz is Germany's largest industrial group.

Mr Riedl, Bonn's co-ordinator for the aerospace industry, said dropping the guarantees would save the government up to DM640m (pounds 223m) by 1996 because it would no longer have to compensate Daimler-Benz for exchange rate losses when the dollar falls below DM1.80.