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Europe

EU Takes Aim at Germany

The European Union on Wednesday ordered Germany to recover billions in illegal aid to banks and improve competition in the postal sector as well as the country's can deposit system.

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Willing to take Germany to court: Competition Commissioner Monti

"The European Commission has concluded its long-standing investigation into the transfer of public assets, in the early '90s, to seven German regional public banks by ordering Germany to recover €3 billion plus interest," a statement said.

"These decisions close a very long and painful dispute between private and public banks in Germany," EU Competition Commissioner Mario Monti said.

He added that his ruling would create "a level playing field in the sector, which is in the interest of businesses operating in Germany, of the consumers/taxpayers, and of the banks themselves as it removes the uncertainty which had been hanging upon them for too long."

Frankfurt bekommt in der Silvesternacht ein Euro-Denkmal

Euro symbol in front of the European Central Bank in Frankfurt

Under legislation introduced at the start of the 1990s, German banks were required to build up substantial capital to maintain new minimum levels of solvency.

WestLB and six other public banks were given the money by their regional governments, which partly or fully own the banks, through transfers of public housing and other assets.

That prompted a complaint to Brussels from the Association of German Private Banks, which also had to increase their solvency ratios without being able to draw on public funds.

WestLB, Germany's biggest public bank, was ordered by the commission to repay €979 million plus interest.

The other six banks targeted by the investigation, with their repayment amounts, are the Landesbank Berlin (€810 million plus interest), Norddeutsche Landesbank (€472 million plus interest), Landesbank Schleswig-Holstein (€432 million plus interest), Bayerische Landesbank (€260 million plus interest), Hamburgische Landesbank (€90 million plus interest) and Landesbank Hessen-Thüringen (€6 million plus interest).

Deutsche Post monopoly fears

Postbank will an die Börse Logo p178

Deutsche Post: A monopoly?

The situation between the European Union and Germany over illegal aid is just the latest in a line of recent clashes between the bloc's governing body and its biggest economy.

The Commission on Wednesday also issued a two-month ultimatum to Germany to improve competition in the country's postal sector.

The Commission wants to force open Germany's postal system to more competition after the German government's refusal to give competitors of Deutsche Post access to the so-called "post-preparation services market," according to a report in the Financial Times Deutschland.

The commercial collection, sorting and franking of letters under 100 grams is currently exclusively guaranteed to Deutsche Post under postal laws. The newspaper said the Commission's move threatens to dismantle the German postal monopoly before its planned end in 2007/08.

Deposit plan also under fire

Prototyp für eine Pfandmaschine Dosenpfand Deutsche Pfand AG

Accusations of discrimination against imports may land Germany in court.

The EU and Germany are also at loggerheads over its beleaguered can and bottle deposit law. The Commission is threatening to take the German government to court in a third case unless it changes a law on deposits charged on non-reusable containers of beverages such as Heineken NV beer and Nestle SA's Vittel mineral water.

Germany is being sued over objections that the deposit discriminates against imports, which are more likely to be shipped in non-refillable cans and plastic bottles.

"In practice, it's very difficult for consumers to take the empty packaging back to a shop and get their deposit back,'' Jonathan Todd, a commission spokesman, told a Brussels news conference recently. "This has the effect of being an obstacle to trade in the internal market.''

Efforts being made to avoid court

The Bundesrat, Germany's upper house of parliament, voted last week to simplify legislation levying deposits on beverage containers, excluding packaging considered environmentally friendly and bringing in a flat-rate deposit.

The Bundesrat voted in favor of a motion put forward by the state of Bavaria to levy the deposits on all containers except those for wine, liquor, alcohol and milk, while exempting packaging such as tubular polyethylene bags, cartons and stand-up pouches. The plan is similar to existing government proposals to change a system that levies deposits at different rates only on specific types of drinks.

The European Commission is delaying action for three months because "they are seriously considering changing the system,'' Todd said.

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