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Business

East On the Dole

The pushing and shoving between the EU and Germany has taken another twist.

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Jubilation has given way to harsh economic realities in east Germany

This time it is about investment aid. Germany gets money from Brussels to help stimulate business in the east of the country, the former GDR.

It would have run out in 2003, but in horse trading and haggling behind the scenes, Berlin has managed to get investment aid for another year out of Brussels.

EU funds will now continue to flow to the east German regions until 2004.

That means, for now, that Germany can continue to offer attractive conditions for investment in the east, Saxony-Anhalt’s state premier Reinhard Höppner told reporters after his meeting with the EU’s commissioner for competition Mario Monti.

"These are clear regulations that will give our investors the security they need", Höppner said.

Germany will be particularly hard done by when the subsidies run dry, because its support for big investment projects in east Germany have been bolstered mightily with EU money.

Slice of the pie

When the 2004 deadline rolls around, the EU plans to cut subsidies on investment in excess of 100 million euro by two thirds. For now, such projects continue to receive 35 percent in subsidies from the state. In future that figure will drop to 12 percent, while on investments between 50 and 100 million euro subsidies will be halved.

For companies with investments under 50 million euro, 2004 will pass without any changes. Höppner called this aspect of the deal a "strong signal" to small and medium sized companies.

Not included at all in the deal, though, are competitive sectors like the car industry. For them, subsidies run dry in 2003.

It’s a moment the eastern regions dread and one their state governments resolutely opposed, wary of further cuts in state support for industry, the likes of which have remade their economies over the last decade.

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