Conservative chancellor candidate Edmund Stoiber faces a further blow to his reputation for economic management, considered by some to be his greatest electoral asset.
Neue Maxhütte is southern Germany's largest steel plant.
Yet another major employer in the state Edmund Stoiber governs is set to go to the wall.
Bavaria's Neue Maxhütte, southern Germany's largest steel plant, cannot be saved and it will be wound down between now and the end of the year, said Jobst Wellensiek, administrator for the plant's parent company Maxhütte AG, which has been insolvent since 1998. Some 750 jobs are involved.
Wellensiek said the search for an investor for the plant, which is sited in the Bavarian town of Sulzbach-Rosenburg, had proved fruitless, as had efforts to restore the plant to long-term financial health without the aid of an investor. All orders would be worked off, he added. And Maxhütte's tubes unit, which was rescued from insolvency in 2000 by Bavarian entrepreneur Max Eicher and his Lech-Stahlwerke GmbH, will not be affected.
Germany's governing Social Democratic Party and its junior coalition partner, the environmentalist Green Party, seized on the news as proof of the failure of Stoiber's economic policy. The chancellor candidate of the conservative alliance of the Christian Democratic Party and Christian Social Union is also premier of Bavaria state.
Stoiber even came under attack from the liberal Free Democratic Party, which he sees as a coalition partner in the event of a conservative victory in the coming general election.
The FDP's economics expert, Rainer Brüderle, said Stoiber had wasted billions of euro of tax revenue with his economic policies. "Stoiber's economic policy is no model for Germany to adopt," Brüderle told Handelsblatt.
Meanwhile, Germany's current economics minister, the independent Werner Müller, described the imminent winding-down of Neue Maxhütte as fitting in with the picture of a clear rise in Bavaria's position in the insolvency league.
The collapse of the Kirch media conglomerate this year, followed by the insolvency of aircraft maker Fairchild Dornier, dealt a blow to confidence in the state, which has tended to be one of Germany's most prosperous regions.
Stoiber himself was quick to put the news from Maxhütte into context, pointing out that the economy isn't going through a particularly rosy period right now. "Maxhütte is just one of 40,000 bankruptcy cases (in Germany) this year." He said Bavaria, which had taken over the steel works in the 1980s when it rescued Maxhütte from insolvency with a 250 million euro cash injection, had drawn up a privatization plan, but this had been turned down by the EU's competition commissioner at the time, Karel Van Miert. He said the blame for steel plant's current woes lay with Van Miert.