Bonn to press for steel cuts

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The Independent Online
GERMANY is looking for binding decisions for the radical restructuring of the European steel industry when EC ministers meet in Brussels tomorrow.

But it increasingly recognises that success is more likely to be achieved in curbing cheap steel imports from Eastern Europe and tightening up on state aid. On the most urgent, but highly sensitive, matter of who is to cut what among the Community's beleaguered steel producers, little progress is expected. 'There is no question of deciding on capacity cuts except in the most general terms,' an Economics Ministry official said.

Ministers are likely to examine only in broad outline the cuts in capacity the Commission believes are needed to see the industry through its crisis - about 30 million tons in crude steel and 19 million tons of rolled products.

The idea is for the producers, having bargained among themselves within this general framework, to come up by late summer with clear commitments to capacity reductions that will be carried out over the following two years.

Germany wants cuts to have a free-market element and be pegged to capacity-utilisation levels. According to Ruprecht Vondran, head of the German steel producers' federation, this would result in his members suffering only 5 million tons of output reductions, reflecting their very high efficiency. Reductions based on market shares would mean capacity cuts of about 9 million tons in Germany.

For much of the balance of these cuts, Germany has its eyes firmly on Italy and Spain, regarded as the main state-aid offenders.

Bonn is hoping for a tough reaffirmation tomorrow of the principle that subsidies can be handed out only in return for market-related capacity cuts. This would increase the pressure on some of the Community's hopelessly uneconomic producers.

Furthering the market-driven principle, Germany is also seeking a system under which companies would be able to purchase 'production quotas' from competitors. This could allow wealthier and more efficient companies to buy increased capacity while weaker rivals would welcome the cash in return for cuts.

Deeply worried by a 60 per cent volume rise in cheap imports from Eastern Europe last year, Germany is hoping to persuade the Commission to adopt a tougher approach.

The German suggestion is for a cut-off level of the 1991 import volume plus 20 per cent, above which punitive tariffs of 30 per cent would be imposed. Other suggestions have been for a higher quota - the 1991 volume plus 30 or 35 per cent.

The German steel producers are also pushing their claim that the Commission has underestimated by more than half the number of jobs that will be lost through the capacity cuts.

The Commission's proposal of 450m ecu to ease the restructuring process was based on a job loss figure of 50,000. According to the steel producers, Germany alone faces 40,000 job losses, making it imperative that the Community increase the social assistance funds.

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