EC agrees to steel recovery plan and subsidies in return for downsizing

Poland has reached an agreement with the European Commission (EC) on the major planks of its steel rescue plan. Deputy Economy Minister Andrzej Szarawarski said on Monday that the government, which has to put the sector back on its feet by 2006, agreed to a potential closure of two small mills, cuts in production capacity and workforce. Now, finished products capacity will fall by nearly 10%, and state aid would not exceed zl. 3.3 billion in 2002-2006. An additional sum of zl. 2.4 billion is earmarked for investment in Polish Steel Mills (PHS), which comprises of four leading mills, to make PHS viable in the longer term. The government wants to find a strategic partner for the steel group to help it fight growing foreign competition. The main candidates willing to buy into PHS, which accounts for nearly 70% of steel output in Poland, are now British-based Lakshmi Mittal's LNM Group and U.S. Steel. "If the EC have no more objections, then there is a chance we can close the competition chapter during talks later this month," Szarawarski said. (Reuters)