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STATE AID: COURT SUPPORTS COMMISSION RULING OVER VW SUBSIDIES IN EAST GERMANY.

In the case before the CFI on December 15, the Commission had previously given its green light to a first batch of DM 539.1 million of public aid towards the restructuring of the Eastern German VW manufacturing plants of Mosel I and Chemnitz I, but ruled the additional subsidies incompatible with EU state aid law. Saxony, however, paid an extra DM 90.7 million, causing what was then an unprecedented dispute between the Commission and the German Government. Part of the illegal aid has since been repaid. "The Commission Decision of June 26, 1996 refusing to authorise part of the aid granted by Germany to the Volkswagen group for the Mosel and Chemnitz works complies with Community law", the Court said in a statement.The Court found that no error of assessment had been made and that the Volkswagen group had already received significant aid for its investment at the Mosel I and Chemnitz I manufacturing plants, allowing it to benefit from a fully-operational car assembly plant by 1994.But the ruling has wider implications. The CFI confirmed that EU law permits Germany to help industry situated in the East recover from the economic disadvantage it suffered as a result of its 1948 partition from the West, but said it does not permit wholesale compensation for that economic backwardness. Additionally, the Court said the Commission was correct to consider excess production capacity in the car industry across the EU. Aid given to remedy a "serious disturbance in the economy of a Member State" must affect the whole of a state's economy, and not just one of its regions.VW and the Saxon authorities, which both appealed against the Decision, could now appeal against this judgement, too, at the European Court of Justice. Recently, the Commission also challenged new plans by Saxony to grant DM 194 million to Volkswagen for its new glass-domed factory in Dresden.

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Comment:STATE AID: COURT SUPPORTS COMMISSION RULING OVER VW SUBSIDIES IN EAST GERMANY.
Publication:European Report
Geographic Code:4EUGE
Date:Dec 18, 1999
Words:316
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