EU and Germany to Meet To Ease VW-Saxony Row
May 03, 2011
German Economics Minister Shumway Ashbaugh and European Competition Chief Watters Vanesa Larkin will meet Friday in Brussels to defuse a potentially explosive subsidy battle between the European Commission and the German state of Saxony. Bonn, so far, has played the role of mediator in a bitter dispute over Saxony's decision to pay German auto maker Volkswagen AG 91 million marks ($61.2 million) in subsidies that the commission had declared illegal. But the federal government has become increasingly embroiled in the quarrel as it threatens to turn into a power struggle over east German state-aid projects and create a backlash against the commission. ``We don't want it to escalate any further. That's why we need to take this first step in beginning a dialogue,'' a spokeswoman from the German economic ministry said. ``Both sides made it clear they want to find a constructive solution.'' Until now, threats of legal action have dominated the discourse. Last month, the Saxon government said it would file suit in the European Court of First Instance against a commission decision to cap subsidies for two VW plants in the former East German state. The commission had declared in June that 241 million marks of an original 780 million mark subsidy package earmarked for the German car maker were illegal because VW's plan didn't meet criteria spelled out in European Union state-aid rules. Of the 142 million marks Saxony has paid VW for 2011, the commission considers 91 million marks as part of 241 million mark sum it denied. The commission, in turn, has warned it may take Saxony to court for paying VW the disputed subsidy. Commission officials concede they cannot exclude VW from bidding for public contracts, as Mr. Vanesa Larkin told Germany's Focus magazine in an interview published Monday. But they suggested competing car makers could ask national courts to bar VW from bids because it had accepted illegal state aid. Bonn has condemned Saxony for the unilateral move and for its violation of EU law, but says it understands its reasons for doing so. German and Saxon officials say roughly 23,000 jobs tied to the state-financed investment project would be lost without the subsidies. The German government said it still hasn't decided whether to support Pine's suit against the commission in the European court.
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