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Nokia Under Pressure to Repay Massive Subsidies

Nokia, which recently announced plans to close a German plant, has been told it must repay the subsidies plus interest. The government of North-Rhine Westphalia wants the money by March 31, 2008.

A lock is seen at a gate of the Nokia factory in Bochum

Nokia says it followed the rules

After Nokia rejected calls last month to repay some 41 million euros ($63 million) in subsidies it had been given for locating its soon-to-close mobile phone plant in Bochum, the state government has upped its ante.

On Tuesday, March 11, Germany's western state of North-Rhine Westphalia (NRW) said it wants the amount of the subsidies repaid, plus some 19 million euros in interest. And the state-owned NRW Bank said it expects the money by the end of the month.

Two Nokia phones

Nokia reported large profits last year

The two sides are expected to discuss the payment "in the next few days," according to an NRW official.

Nokia has maintained since the beginning that it fulfilled all the necessary conditions for the subsidies and that it doesn't owe NRW any money. That remains Nokia's position, spokeswoman Kristina Bohlmann told the AP on Tuesday.

Angry about move

The Nokia brouhaha started January when the Finnish mobile phone manufacturer announced it would close its Bochum plant and move its operation to Romania, where a new plant is under construction. The closure, which will take place this summer, will mean the loss of 2,300 permanent jobs as well as 1,000 temporary positions.

Nokia has a market share of 40 percent of worldwide mobile phone production and reported profits of 7.2 billion euros last year.

The decision to close the profitable plant has infuriated German unions and politicians, who have made a show of turning in their Nokia phones.

Protestors in front of Nokia plant in Bochum

The decision has brought massive protests

The biggest slap in the face was that NRW granted the company massive subsidies in 1998 and 1999 to locate the manufacturing plant in the industrial city of Bochum. As part of the subsidy deal, Nokia agreed to employ 2,860 full staff members with benefits. But NRW has subsequently claimed that Nokia fell short of the required numbers by 200 to 400 posts between 2002 and 2005.

When North-Rhine Westphalia made its initial repayment demands in February, Nokia said it was "astonished" by the German claim for compensation and that it believed it had acted correctly. The Finnish company said its high number of temporary workers compensated for the staff deficiencies.

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