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Irish seek record £50m steel aid

Another huge row is brewing over state aid to industry - one that risks embarrassing the Government and outraging British Steel - as the Irish government shortly begins seeking European Commission approval for one of the biggest per-man subsidies in recent history.

The 300-strong Irish Steel company needs an estimated £50m in aid - £166,000 per employee - when the European steel industry is struggling from overcapacity. British Steel takes a tough line on state support, having resorted to legal action in an attemptto stop subsidies to Italian and Spanish firms.

The position of the Government may be less emphatic. An objector to many previous steel and airline subsidies, it may be about to soften its line, or so it is feared among Europe's private steel firms.

British Steel would only say that its opposition to aid was well known. But an analyst said: "Such a large grant for an industry that desperately needs to slim down is absurd. But these are politically sensitive times in Anglo-Irish relations." It would test ministers' resolve and British Steel's patience."British Steel has done its painful restructuring without state help and feels European competitors have an unfair advantage."

Irish Steel has received an estimated £200m in state aid since it was founded in 1938 in Cork, an area devastated by unemployment. The company is said to be losing about £1m a month, despite recent cost-cutting including a reduction in staff from 500 to 300. The proposed injection of state funds was to have been about £25m, though Irish government sources confirm the figure is more likely to be about £50m over three years.