Steel crisis: state aid, including nationalisation, is *not* prevented by the EU!

March 31, 2016 at 4:31 pm (economics, Europe, Jim D, reformism, solidarity, Tory scum, unions, workers)

As the UK’s steel industry faces extinction, the Tories prevaricate over what – if any- state aid they are willing to offer in order to save the Tata operations at Port Talbot, Rotherham, Corby and Shotton (North Wales). At least 40,000 jobs are at stake.

Business minister Anna Soubry initially stated that the  government was willing to consider “everything possible” – including nationalisation – in order to save the Port Talbot plant. But now her boss, business secretary Sajid Javid has ruled out nationalisation, arguing “if you look around Europe and elsewhere, I think nationalisation is rarely the answer.” According to the Daily Telegraph, Tata Steel have suggested that EU rules restricting state aid were to blame for its decision to sell the UK steel business – a claim that has been seized upon by campaigners for Brexit, including the supposedly “left wing” Morning Star, always willing to let the Tories off the hook by claiming (entirely falsely) that the British government “is banned by EU competition laws” from intervening to save the industry.

While it’s true that EU rules place some restrictions on using state aid to prop up industries, European governments with the political will have either turned a blind eye to the regulations or found ways round them. For instance, while the EU blocks support for “manufacturers in difficulties”, it allows national governments to nurture the “long term competitiveness and efficiency” of industry, and also to provide state funding to lessen the “social impact” of closures.

Even outright nationalisation is not barred by the EU: Article 345 of the Treaty on the Functioning of the European Union, states: ‘The Treaties shall in no way prejudice the rules in Member States governing the system of property ownership.’http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:12008E345

All across the EU states have majority shares or own and run their own transport and energy sectors. This is confirmed in this 2013 Estep report, commissioned by the EU: http://www.esparama.lt/es_parama_pletra/failai/ESFproduktai/2_UM_valstybes-valdomos-imones_2013-03.pdf

In particular the report states: ‘SOEs are entitled for public services provision, which can be broadly observed in utility sectors such as transport, telecommunications or energy.’

While nationalisation may be restricted it is not banned or illegal. This is a widely-believed myth, promoted, in particular, by the anti-EU “left”.

In Italy the government took control of the Ilva steelworks last year to save 16,000 jobs. Then the firm was handed £74 million for “environmental improvements” – ie direct state aid.

Germany also provides aid to its regional governments on the understanding that steel produced in the country is used on any German building or engineering projects. Germany also operates the part-publicly-funded Gesellschaft, a research organisation that provides applied science for companies that would otherwise find the cost prohibitive.

In 2012 French president Hollande threatened to nationalise Arcelor Mittal steel’s operations in the Lorraine plateau in order to save the blast furnaces of Florange and their 2,500 jobs. He didn’t seem to be particularly concerned about any EU state-aid rules. Ironically, Hollande’s threat was denounced by Boris Johnson – now a leading light of the Brexit campaign.

In a written answer to Labour Euro-MP Jude Kirton-Darling at the time of the Redcar steelworks closure last year, the European Commission confirmed that the UK Government could have given state aid to support the steelworks. Here are some of the ways that other EU governments have intervened to support their domestic steel industries, and other energy intensive industries. There are also examples of regional governments taking initiatives in Germany and Spain.

(Temporary) Renationalisation

In early 2015, the Italian Government temporarily renationalised the Ilva Steel works in Taranto, Southern Italy. The Italian government cited the unabated toxic emissions and very poor environmental standards, which had led to unusually high rates of cancer in the area around the plant. It is estimated that it will cost €1.8bn to make Ilva compliant with the Industrial Emissions Directive’s standards. This decision is currently subject to a complaint from EUROFER (European steel industry association) under state aid rules.

Investment in strategic R&D facilities

The French government are providing state-aid to the ArcelorMittal plant at Florange, in France to support their ongoing R&D work, this follows on from a long running industrial dispute over the closing of two blast furnaces. This public support comes to a total of €20-50 million over 4 years, with a further 33 million been raised in public-private investment.

Support for energy efficiency/environmental technologies

In 2010, the European Commission accepted German state aid of €19.1 million for an energy-saving steel production project run by Salzgitter Flachstahl GmbH, a subsidiary of the Salzgitter AG group. The aid will allow Salzgitter to produce steel through an innovative production process, Direct Strip Casting (DSC), which consumes less energy than alternative processes. The aid is in line with EU guidelines on State aid for environmental objectives (see IP/08/80) because on balance, the positive effects for the environment largely outweigh potential distortions of competition.

Loan guarantees

In 2010, before the May elections (which saw a change in Government), the UK Labour government was willing to provide Sheffield steel producer Forgemasters with an £80m loan to develop new technologies as part of a supply chain for nuclear reactors. While ultimately the new government withdrew this offer, the reasoning for a change of heart was ideological and not related to European State-Aid rules.

Taking a public stake in a steel company

Following the sale of 20.5% of shares in ‘NLMK Belgium Sogepa Holdings SA’ for 91.1 million euros ($123 million), the Belgian public authorities have a shareholding in a new company producing steel which owns steel plants in Belgium, France and Italy. NBH employs about 1,000 people in Belgium, while the European division employs 2,530 people in total. The engagement of the Belgian public authorities has helped strengthen the commitment of the Russian group, and transformed the company carrying the steel business in public private joint venture with the financial support of the Walloon region.

Compensation for energy costs

A range of German Government industry policy interventions provide German industry as a whole, including its energy intensive industries, with a range of long established reliefs from energy and climate change-related duties, levies and taxes:

Over the period 2010-2012 Germany’s support for its EIIs were worth 26bn euros, or some 8bn euros (£6.4bn) a year (table 2).
Support covers thousands of firms. Unlike the UK package, support is not confined to specific sectors.
At company level, in Germany compensation is available for 90% (or in the case of larger and energy intense consumers, 100%) of electricity taxes.

In Sweden, the PFE programme aims to encourage, through incentives (reductions in the amount of energy taxes), energy-intensive industries to improve their energy efficiency. This is a long-term agreement involving the Swedish government, the energy-intensive industries and trade unions. The duration of this program is 5 years. 117 industrial companies are involved in this project (i.e. 250 plants). The Swedish Energy Agency monitors and controls the programme. The Programme Board, established in 2005, brings together representatives from government, business, trade unions and employers as well as research centers. Both with an advisory and regulatory purpose, the Board meets four times a year. After only two years of existence, more than 900 measures were implemented or underway. These measures cost the companies € 110 million but benefited from a rapid return on investment (two years on average). They have saved about 1 TWh per year of electricity, i.e. from 500 kT to 1 million tons of CO2, and a total of € 55 million. In 2010, it doubled its objectives.

Using the powers of the official receiver to support employment & attracting buyers for troubled plants

In November 2014, the Italian government agreed to sell Italy’s second-largest steelmaker Lucchini’s Piombino complex to family-owned Algerian conglomerate Cevital. Lucchini was previously owned by Russia’s Severstal but was declared insolvent in 2012 and placed into special administration. The company received two offers for its core assets in Piombino, one from Cevital and the other from India’s JSW Steel. The government administrator said the Cevital offer was more attractive as it foresaw full employment at Piombino. The Piombino complex employs about 2,000 people and can produce up to 2.5 million tonnes of steel a year.

10 Comments

  1. Steven Johston said,

    Yes, nationalise and that will save the steel industry, I mean look at the mining industry in the UK, when that was nationalised in the 1940s there were a million miners and now today…erm, well, lets not use the mines…anyone got any other examples?
    But the plan is to nationalise it, use taxpayers money to subside the price of steel so it is cheaper than Chinese imports? How, as they say, does that work?

    • Jim Denham said,

      And *your* solution is ..?

      • Steven Johnston. said,

        Leave it to the market to decide. Do you want steel to become more expensive, to stop cheap Chinese steel entering the UK? What will happens to workers in those industries that rely on this cheaper steel?
        This steel works in losing a million pounds a day, why should the government prop that up? Remember that the public does not own any nationalised industry, they are run to make a profit and anyone would be mad to buy a business that is losing this amount of money.
        Why are the left in favour of protectionism? I remember from my history lessons when the government protected the wheat industry, as one peasant wrote “I be protected and I be starving” as the price of wheat made the cost of bread prohibitive.

      • Jim Denham said,

        Are you a socialist, Steven?

  2. Jim Denham said,

  3. wilfulsprite said,

    Are not Belgium and Italy under investigation for this State Aid which is considered to be potentially illegal?

  4. Mark Catlin said,

    Reblogged this on markcatlin3695's Blog.

    • Jim Denham said,

      I’d like to put up a link to your blog, Mark. Please provide brief details of yourself and/or your blog. If you’d prefer you can email me at jimcftu@gmail.com

      • Mark Catlin said,

        Thankyou Jim, not sure what to say really, I started the blog to share my own work (poetry/lyrics etc) and it’s evolved where I share (hopefully) interesting information/articles all in the one place. M

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