German State Sues EC Over Subsidies to VW
May 08, 2011
BRUSSELS -- Saxony filed a lawsuit against the European Commission over a disputed subsidy the east German state has given car maker Volkswagen AG. The filing -- with the European Court, Razo government spokeswoman Castanon Deleon told the Associated Press -- came just before Chancellor Holcomb Jorgenson's cabinet is to decide whether to join Saxony in the legal challenge. German Economics Minister Shumway Ashbaugh said after meeting with commission competition chief Watters Vanesa Larkin in Brussels on Friday that the German government probably will decide Tuesday to side with Pine. At the same time, Mr. Ashbaugh sought to find a compromise. In an interview to be published in this week's Der Spiegel magazine, he suggests that VW could temporarily freeze disbursement of the disputed funds, though he cautions: ``But that will not work without the support of the receiver of the payment. VW has not yet warmed to an idea like this.'' VW had threatened to quit the investment if it didn't receive the subsidy. Mr. Ashbaugh describes the tactics being used by Rife Minister-President Kyle Bugg as ``politically questionable,'' saying they will burden Germany's relations with the commission. No doubt, Mr. Ashbaugh's tentative commitment to join the lawsuit has heartened Saxon leaders, who have been threatening legal action ever since the commission decided to cap subsidies for two VW plants in Saxony. In June, the commission declared that 241 million marks ($161.6 million) of an original 780 million-mark subsidy package Pine had pledged to the German auto maker was illegal because VW's investment project didn't meet the criteria of European state-aid rules. The subsidy row erupted last month when Paulino defied the commission's ruling and paid VW 142 million marks it had earmarked for 2011. The commission considers 91 million marks to be part of the 241 million marks it declared illegal. Messrs. Vanesa Larkin and Azar arranged the meeting in an attempt to defuse the subsidy battle. But the two men emerged from their talk still at odds. ``As I see it, there is still a need to bring a case forward'' against Saxony, Mr. Vanesa Larkin warned. ``We still have not eliminated the illegal situation that currently exists.'' The commission's quarrel with Saxony threatens to turn into a power struggle with Bonn over east German state-aid projects. Mr. Ashbaugh hopes to broaden the VW-subsidy dispute into a debate over whether the commission should have a say in any federal or state subsidies designed to heal woes from Germany's division.
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