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Brussels, 28 June 2000

Commission declares the aid granted to the steel company Salzgitter (Germany) illegal

The European Commission has adopted a decision declaring the tax aid granted to Salzgitter AG, Preussag Stahl AG (PSAG) and subsidiaries of the steel group from the 1980s to 1995 incompatible with the common market. The firms in question have now merged into a single company known as Salzgitter AG - Stahl und Technologie (SAG), which will have to repay the aid.

It came to the Commission's notice early in 1998 that the German authorities had been awarding grants to Salzgitter for many years under the Zonal Border Development Act (Zonenrandförderungsgesetz ZonRFG).

That law, which was adopted by Germany in 1971, provided for a number of tax incentives for companies located along the frontier with the German Democratic Republic and Czechoslovakia. In particular, it allowed them to create tax-exempt reserves and to introduce more favourable depreciation arrangements than under ordinary law.

The Commission approved the law after examining it in the light of the EC Treaty state aid rules. However, Salzgitter is a steel company and, as such, subject to the stricter rules of the ECSC Treaty and the Steel Aid Code. The aid granted was incompatible with that legislation.

Germany must now take steps under domestic law to recover the aid from Salzgitter. Since the Commission does not have access to the information necessary to calculate the exact amount owed, the German authorities must do so in cooperation with the Commission.

PSAG, a former subsidiary of Preussag AG, had a consolidated turnover in 1997 of DEM 5.4 billion for a total workforce of approximately 12 000 and owns three plants, at Salzgitter, Peine and Ilsenburg (Germany). It purchased Salzgitter AG in 1989 when it was privatised by the German authorities and acquired Walzwerke Ilsenburg GmbH in 1992. PSAG was sold to the Land of Lower Saxony and the banking group Nord/LB early in 1998 and was renamed SAG.

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