Gov't to wrap up steel restructuring

The government this week will discuss finalizing the restructuring program for the Polish steel industry, the last element required for Poland to close its European Union negotiations on trade. The program must first be approved by the European Commission (EC), which still has reservations about its effectiveness, a source close to the EC said. To close the talks on competition, one of five chapters Poland needs to complete EU entry negotiations, the country must present a viable restructuring plan and budget that will allow its steel industry to compete on the European market without subsidies after 2006. Earlier this month, the EC rejected the government's restructuring proposals, requiring more detailed plans of how subsidies to the steel industry would be spent. "Everything indicates that the cabinet will accept Poland's final negotiating position on the restructuring of the steel industry at its meeting on Tuesday," said Ewa Haczyk, the spokeswoman of the Committee for European Integration (UKIE). "If everything goes well and the cabinet approves the plans, we hope ... the issue will be discussed during the negotiating round on Sept. 30, so that we can close the (trade) chapter."

The EC has already approved Poland's plans to invest zł. 3.27 billion ($779 million) in repvamping the steel industry from 2002-2006 and to cut its steel production capacity by 901,000 metric tons a year. The brunt of the production cuts will be borne by steel conglomerate Polish Steel (PHS), which accounts for about 70% of domestic steel production and will see its output reduced by 686,000 tons, Haczyk said. The government also plans to shed 4,000 workers from the industry total of 32,000. Poland imported 3.12 million tons of steel in 2001, while domestic consumption reached 6.7 million tons, according to figures from the Metallurgical Chamber of Industry and Commerce (HIPH). But according to Gordon Moffat, the director of EU steel agency Eurofer, the approval of the budget and restructuring plans by the cabinet do not mean smooth sailing through the negotiations on trade since the EC still has reservations about the viability of the plans. "I know the commission has serious doubts about the plan," Moffat said. "It has serious doubts about the forecast of consumption on which it is based, about the configuration of the industry, and it has serious questions about the transparency of state aid and the plans to write off debt." The failure of the restructuring plan to shape the industry according to realistic expectations of domestic and international demand for steel and to effectively organize steel production in the four mills that comprise PHS will allow European steelmakers to push Polish steel off the market, resulting in plant closures and widescale layoffs. "It's in their interest to have a credible restructuring plan that results in the viability of the industry," Moffat said. "If not, the remaining parts of the industry will inevitably fail because once they become members of the community, they will be subject to the state-aid rules of the EU, which prohibits any kind of state aid. Therefore, the companies not able to withstand the force of the single market will inevitably disappear. The only way for them to give employment security to their workers is to bite the bullet and take the necessary action now."