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Germany

Germany, EU Seek Elusive Eco-Tax Deal

German Finance Minister Hans Eichel wants to win a 10-year exemption for major polluting industries.

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Eichel: Five years is not enough

The European Commission and Germany failed in talks late Wednesday to reach agreement on extending environmental tax exemptions. These would affect the federal republic’s mining, chemical and steel industries.

Eichel’s meeting with Mario Monti, the European commissioner for competition, was “fruitful” according to spokesmen from both sides. But what variety of fruit they may eventually yield, in policy, is yet unknown.

Efforts to achieve a compromise have been hastened by the approach of an important deadline, just months away. In July this year, Germany requested an extension of 10 years of exemptions currently permitted only until March 2002 by the EU’s executive authority.

Monti has floated the idea of a 5-year exemption or, for a longer period, a reduction in the exemption’s breadth. But Germany has balked at such compromises.

A third option proposed by the commissioner would entail new “verifiable” environmental standards for industrial production, within which Germany would be allowed to operate as it wishes but would be required to demonstrate its compliance.

The two parties are now apparently moving toward a potentially complicated deal, delving into finer details of environmental taxation. As Germany is one of the EU’s heavyweight industrial producers, it is essential for the commission to keep it in the fold.

Monti’s office has begun the process of evaluating German environmental standards for industry, comparing them to European regulations in fine detail. But the commissioner’s fundamental objection – that an extended exemption will undermine free market competition in the EU – is a difficult one to overcome.

A spokesman for the commissioner told journalists Wednesday evening after the talks that “there are still problems on the table.”