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Brussels, 17 April 2008

State aid: Commission opens investigation into tax benefits for Hungarian steel producer Dunaferr

The European Commission has launched an in-depth investigation under EC Treaty state aid rules into an investment aid granted by Hungary to Dunaferr, the largest Hungarian steel producer, part of the Donbass/Duferco group. The Commission will investigate whether the subsidy is in line with EU state aid rules which prohibit investment aid for steel products. The opening of an in-depth investigation provides interested parties with the opportunity to comment on the measure. It does not prejudge the final outcome of the procedure.

Competition Commissioner Neelie Kroes said “The Commission encourages investment projects that create jobs in assisted regions of the EU. However, given the steel sector's structural, worldwide over-capacity, EU state aid rules forbid subsidies to the steel industry."

In January 2007, the Hungarian authorities submitted information to the Commission on the basis of the applicable 2002 Multisectoral Framework on Regional Aid for Large Investment Projects (see IP/02/242), which indicated that Dunaferr had been awarded an investment aid of €37.4 million in December 2006. The Hungarian authorities granted the aid under an aid scheme previously approved by the Commission, which establishes tax incentives to ensure productive investment in the less developed regions of Hungary.

The Commission has serious doubts whether the aid to Dunaferr, which owns the only integrated steel works in Hungary and is part of the Donbass/Duferco group, respects the provisions of the 2002 Multisectoral Framework. The latter prohibits aid for investment projects in the steel industry because of the structural overcapacity of this sector. The Hungarian authorities argue that the aid concerns only products which are not part of the steel sector. The Commission's investigation will focus in particular on the classification of certain products.

The non-confidential version of the decision will be made available under the case number C 18/2008 in the State aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

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