Government bows to EU pressure to adjust SSE policies

The government yesterday said it had agreed to EU demands to adjust its public aid handouts to the bloc's regulations and quickly finish thorny accession talks on competition policy. EU members fear that tax concessions given to firms investing in its special economic zones (SSEs) would give them an unfair advantage over their peers after Poland joins the bloc and its single internal market in 2004. "We do not agree with these demands but we had no choice. None of the 15 member states wanted to continue talks with us on the subject," Economy Minister Jacek Piechota told reporters after a cabinet meeting. Piechota said, however, that the agreed revision of rules in the economic zones - set up in the mid-1990s to fuel investment and growth in poor, high unemployment areas - could spark litigation from investors citing a breach of agreement. Under Poland's existing rules, firms which topped an investment and job creation threshold in the zones are exempt from all tax payments until 2007 and get a 50% cut until 2017. EU rules cap tax breaks at 50% of investment. The Warsaw cabinet, under pressure to win a more favorable entry deal from Brussels or risk losing next year's EU entry referendum, also agreed to use "simplified" aid rules to help its poorest farmers cope with increased competition in the EU. (Reuters) A.K.